London house prices have risen almost 60 per cent since the financial crisis.
The UK capital was once the shining star of the UK property market, as overseas investors raced to place their money in the safe haven. The result fuelled rapid price growth, but falling supply and a change in stamp duty in 2016 has left London’s market cooling in the last year.
According to the latest ONS House Price Index, London saw prices rise just 3 per cent year-on-year in June 2017, with values falling month-on-month by 0.3 per cent.
“London’s transformation from pacesetter to also-ran is looking ever more definitive,” comments Jonathan Hopper, managing director of Garrington Property Finders. “After years of gravity-defying price growth, the capital’s property market has entered uncharted waters. In all but the most buoyant outer boroughs, sellers are being forced to adjust their price expectations and astute buyers are scenting opportunity – frequently securing significant discounts.”
Nonetheless, the capital has seen a strong recovery since the crash of 2008. Research from Lloyds Bank shows that London borough average house prices have increased by 59 per cent from 2009, with prices in the City of London and Waltham Forest doubling.
The average house price in Greater London increased by 59 per cent from £362,641 in 2009 to £578,381 in 2016, compared to a growth of 31 per cent for England and Wales.
The average slowdown, meanwhile, masks mixed performances between different boroughs. House prices in the City of London have doubled (100 per cent increase) since 2009 to £908,759, closely followed by the borough of Waltham Forest, which also had a significant increase of 97 per cent to £433,105.
Tower Hamlets has performed the worst since the financial crisis, with average house prices increasing by 54 per cent between 2009 and 2016. Even though this is below the overall increase for London, it is still a higher rate of growth compared to the rest of England and Wales (31 per cent).
London’s Prime boroughs – City of London, Westminster and Kensington & Chelsea – led the road to recovery between 2009 and 2014, with an 80 per cent increase in average house prices. Homes in the City of London nearly doubled in that period from £455,020 to £894,046 (97 per cent), followed by Westminster (86 per cent) and Kensington & Chelsea (74 per cent). However, in the last two years house prices in these locations have seen little growth with prices in City of London and Westminster rising by only 2 per cent.
In the last two years, the largest growth areas are from London’s outer boroughs with an average growth of 19 per cent, compared to 4 per cent for prime boroughs and 12 per cent for inner boroughs. Nine out of the top 10 growth areas over this same period are within Outer boroughs with an increase in house prices between 25 per cent and 32 per cent.
Newham and Barking & Dagenham, the two boroughs most impacted by the downturn, are now the areas which have seen the biggest increase in house prices in the last two years. Helped in part by the regeneration of this area as a result of the London 2012 Olympic Games, Newham has seen average house prices increase from £269,529 in 2014 to £356,638 in 2016, a rise of 32 per cent, with Barking and Dagenham also reporting a rise of 32 per cent to £285,129.
“Average house prices in the most expensive areas are starting to flatten, whereas London’s most affordable areas are showing healthy growth,” explains Andy Mason, mortgage director at Lloyds Bank. “A possible explanation for this is the ongoing legacy from the 2012 Olympic Games and that outer borough areas like Newham will benefit from the Crossrail link to the City due for completion at the end of 2019.”
London property prices slide as regions stay strong
12th May 2017
London property prices slipped in May 2017, but regional markets are staying strong, according to Home.co.uk.
Greater London prices dipped 1.6 per cent year-on-year, the site’s latest index reveals, but the stable regional cities helped to offset the cooling capital with prices rising 0.6 per cent across England and Wales on average.
The East of England and the East and West Midlands are performing particularly well, notes the report, with significant growth, over and above the rate of monetary inflation, evident in five English regions, albeit not in Scotland or Wales.
Contrary to London’s woes, the North of England shows considerable improvement in property marketing times. Increased buyer activity has pushed the typical time on market for homes in these regions back down to 2008 levels.
The North West is now showing annualised growth of 3.9 per cent and the North East looks set to follow as this formerly lacklustre market annually shows genuine recovery.
“Despite these vigorous regional property markets, the national figures will continue to reflect a stagflationary housing market. Whilst this month’s price rises indicate that there remains much confidence and momentum, the transition towards a period of lower year-on-year price growth appears complete,” concludes the report.
“Prices are always stronger in the spring and early summer. However, looking towards the autumn and winter, we expect price falls in London and the South East to impact significantly on the national figures,” adds Home.co.uk. “In May 2016 the annualised rate of increase of home prices was 7.5 per cent; today the same measure is just 2.8 per cent.”
East of England leads house price growth
12th May 2017
While the London market continues to cool, the East of England is leading the regional house price league table.
Prices in the area have risen twice as fast as the next best region, the East Midlands, over the last 12 months, according to Home.co.uk. On a monthly basis, prices rose 1.9 per cent – significantly higher than the 0.6 per cent average for England and Wales.
The boom may not last for long, though, suggests the site’s report, as supply is also rising in the region, while prices risk following London and the South East in becoming “seriously out of step with earnings and rents”.
Confidence is apparent across all other English regions, notes the report, with prices up both month-on-month and year-on-year in February 2017 and, typically, properties are spending less time on the market than they were a year ago.
Only Scotland and Wales have shown price declines since January. The strongest monthly rises, aside from the East, were in the South East (0.9 per cent), East Midlands (0.5 per cent) and the North West (0. per cent).
In line with seasonal expectations, price rises indicate a spring lift but year-on-year price growth continues to decline. In February 2016, the annualised rate of increase of home prices was 8.1 per cent; today, the same measure is 3 per cent.
“A seasonal fillip is, of course, to be expected at this time of year. However, we enter 2017 on a declining year-on-year price trend and this key indicator shows that the UK property market is cooling overall,” adds the report.
London house price growth slows as affordability falls
28th November 2016
London’s house price growth is slowing, weighed down by worsening affordability levels.
The new Hometrack UK Cities House Price Index highlights the extent to which the capital’s property values have climbed in recent years, with the price to earnings ratio in London now at a record high of 14.1. London has the highest price to earnings ratio, due to lack of supply and strong demand fuelled by low mortgage rates, which have driven house prices up 86 per cent since 2009. London’s 14.1x is the highest in the UK, ahead of a national average of 6.5x and the lowest of 3.7x in Glasgow.
Cambridge and Oxford also have double digit price to earnings ratios, which are well ahead of the average over the last 12 years.
As affordability levels become stretched, fewer households can participate in the market which leads to reduced levels of turnover and a resulting slowdown in the rate of house price growth. Indeed, London’s annual house price growth is near to a three-year low (9 per cent), with Hometrack forecasting that will “slow to low single digits in the next 6-12 months as demand softens in the wake of a raft of fiscal policy changes aimed at overseas buyers and investors as well as concerns over the impact of Brexit on the economy”.
Instead, regional cities will now continue to drive house price growth. Bristol remains the fastest growing city, with prices up 10.6 per cent in the last year, although its price to earnings to ratio has risen to 9.2x, which is causing its growth to slow. Affordability across other cities is more in line with the long run average, with three cities boastings price to earnings ratios below the long run average: Glasgow, Liverpool and Newcastle. House price growth is starting to increase in all of them.Google+