'Unsustainable' 10% Surge in London House Prices Smashes Previous High Amid 'Buying Frenzy'

This article by Matt West of This is Money.co.uk reveals a report that showed house prices in London are rising in some regions but at below the rate of inflation.

House prices in London are rising at 'unsustainable levels with the average asking up now £30,000 higher than their previous July peak, a report showed today.

Property website Rightmove said the onset of autumn saw national average asking prices rebound by 2.8 per cent in October - reversing September's 2.8 per cent decline - and rise 3.8 per cent on the same time last year. The average property was worth £252,418, up almost £7,000 in a month from £245,495 in September, the website said.

But in London, after the summer lull saw a slight drop in properties being listed for sale and slight price falls, new seller numbers surged 15 per cent while asking prices shot up 10.2 per cent in October.

Patchy: House prices are rising in some regions but at below the rate of inflation while in other regions they have fallen

The average asking price in the capital is now 5.6 per cent or £28,852 above July’s record of £515,379, equivalent to an average growth rate of 2 per cent a month over the past quarter.

And with affordability in London stretched to near breaking point, Rightmove said the second phase of the Government’s Help to Buy scheme was likely to have little impact on the lives of ordinary Londoners. 

Buyers in the capital were already facing income challenges that would restrict their borrowing capabilities rather than difficulties finding a deposit, the website said.

Average prices in outer London of £461,937 are more than double those in the rest of England and Wales at £226,861. But average wages are around 60 per cent higher in the capital, meaning Londoners are struggling to service ever increasing mortgage debt.

Elsewhere in the country, two regions  - Wales and the West Midlands - recorded a fall in average prices in October. House prices in five other regions - the North, North West, Wales, West Midlands and the South West - remained lower than a year ago.

Rebound: After falling for two consecutive months during the summer lull, house prices have begun to rise again 

Seven in ten regions saw house price rises that lagged behind inflation. Only London, the South East and East Midlands saw house prices rise by more than retail price inflation of 3.2 per cent . 

The South East remains the natural recipient of increased demand given the extreme supply shortages in London.

Asking prices rose 2.3 per cent in October although they remained 2.1 per cent behind the peak of £330,612 achieved in July this year.

Rightmove director Miles Shipside said: 'Fewer sellers coming to market in the capital during the traditional summer recess resulted in total price falls of 4.3 per cent over August and September. 

'However, this month’s rebound in the number of sellers brings the quarterly growth figure back into line with the recent trend at around 2 per cent a month. 

'Although not sustainable in the longer term, some agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare.

Capital trends: Some estate agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare

'Unsurprisingly, many of this month’s best performers are boroughs in inner London.'

He added London needed to see an increase in housing supply to meet heightened demand which would only come from more houses being built and more owners putting properties on the market. 

Rightmove said the situation in London was exacerbated by overseas investor demand swallowing up much of the new-build supply, adding to shortages and creating upwards price pressure.

Mr Shipside said: 'London is a world city where overseas investors see real estate as a safe asset, at a time when safe assets are increasingly scarce, and developers are building and marketing a lot of one and two-bedroom flats to meet that demand. 

'While they can achieve volume sales at premium prices, this eats up a much-needed source of fresh supply and drags up existing property prices at an even faster rate.'

The Rightmove house price report is the latest in a long line showing significantly higher activity in the housing market.

Last week, the Council of Mortgage Lenders said lending in the three months to the end of September rose at the fastest rate in five years.

Prices

Article Source: http://www.thisismoney.co.uk/money/mortgageshome/article-2465958/London-property-market-seeing-buying-frenzy-says-Rightmove.html

The Cost of Renting in the UK is Nearly at a Record High

This article by the Landlord Expert on October 4th, 2013 tells us that private rents are just £1 short of record highs as an effect of rising house prices on rental market.

The lettings network LSL Property Services said rents had reached their second highest level since 2008 - largely because of a shortage of property to buy as Government schemes help people onto the ladder.

LSL, which owns the Your Move and Reeds Rains chains, reported that at £743 on average, monthly rents in August were just £1 less than the all-time high recorded in October 2012.

The pace of rent increases stepped up to 0.7% month-on-month in August.

It said rents were 1.3% higher across England and Wales than a year ago - less than half the rate of inflation - but London's rental market was soaring.

At £1,126 typically, rents in the capital have risen at a much faster rate than inflation and are up by 4.8% year-on-year.

Earlier this week, official figures showed that house prices in London were up by nearly 10% year-on-year , indicating the strength of demand.

Wales saw the second biggest annual increase in rents, with a 2.3% uplift taking average rents to £561.

The South East recorded the strongest month-on-month growth, with a 2% rise pushing monthly rents to £762.

By contrast, rents in Yorkshire and the Humber are 1.6% lower than last year, at £536 typically, followed closely by a 1.5% annual fall in the North West, taking average rents to £582.

The North East saw the biggest month-on-month drop in rents, with a 0.8% fall taking average rents to £523.

Across the country, rental inflation had been cooling off for much of this year following the launch of Government schemes to give people with low deposits a chance to buy.

First-time buyer numbers have reached their highest levels in more than five years following the initiatives such as Funding for Lending and Help to Buy, which have widened access to mortgages and allowed some people who were previously trapped in renting to break free.

But David Newnes, director of LSL Property Services, said that weak income growth, which has an impact on households' ability to borrow, and a lack of housing supply meant that the private rental sector was continuing to see strong demand from new tenants.

Mr Newnes said: "Better availability of finance has allowed some households to leave the rental market. And rents certainly felt the short-term impact of that.

"But releasing a blast of pent-up pressure to buy a home is unlikely to change the long-term trend in renting.

"Although Government schemes are helping, buying a first home is still extremely hard on the back of low salary growth."

 Article Source: http://www.landlordexpert.co.uk/index.php/news-centre/6222.html