Property Values in Central London Rising Faster Than the Rest of the UK
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Although house price rises are slowing throughout the rest of the UK, they are continuing to accelerate in Central London, despite five interest rate rises in the past year.
Despite slowing throughout the rest of the UK, the value of property in Central London continued to rise in June 2007, with an increase of 1.8% on the previous month’s prices, according to figures recently published by estate agents RightMove. In contrast, house prices in the rest of England and Wales rose by only 0.3% on the previous month, highlighting a new trend in house prices; the traditional north-south divide has gone to be replaced by one between London and the rest of the UK.
Despite five anti-inflationary increases in the Bank of England interest rate in the past year, house prices have continued to climb, even though mortgage repayments have increased for existing homeowners and potential first-time buyers. In addition, the high end of the market in the Capital is performing even better with luxury property for sale in Central London rising at the fastest monthly rate for 31 years, gaining 3.1% in June. That represents a rise in property values of 35% in the past year - the biggest annual gain since mid-1979.
However, that tells only part of the story as property values in Kensington and Chelsea have risen an incredible 71% in one year, making it London's most expensive district with an average house value of £1.46 million pounds. Much of this price increase has been attributed to wealthy buyers benefiting from huge City bonuses snapping up as much property as possible, as well as an influx of wealthy foreigners doing the same.
So, even though supply seems to be matching demand in the rest of the UK, at least for now anyone looking for property to buy in central London must still be prepared to pay a premium. The average price of a house for sale in central London, excluding the districts of Kensington and Chelsea, currently stands at £394,730 - well outside the reach of most first-time buyers, but within the reach of anyone already on the property ladder.
Cynics have long been predicting a rapid decrease in overall house prices, but after five interest rate rises they are still holding steady in most of the UK and even racing ahead in central London. Prime Minster Gordon Brown recently announced his government’s commitment to building three million homes over the next 20 years to help stem the gap between demand and supply. But while that gap remains, the latest house price figures would suggest that even five punitive rises in mortgage repayments in one year cannot stem the tide of rising house prices. The economics of house prices have changed considerably in the last 20 years, making it harder to predict how house price movements can be affected. One thing is certain: owning one or more properties in central London over the last 20 years has proved to be a sterling investment!
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Author - Paul McIndoe - finance advisor in London
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