Mervyn King’s ten year reign as Governor of the Bank of England has seen the average price of prime central London property soar by almost £600,000 and rents in the capital increase by 44%, according to Cluttons.
When King first took up the position in Q3 2003, the average cost of prime residential property in the capital was £1,013,384. Ten years later, house prices average at £1,604,873 for Q2 2013 – a 58.4% total increase, averaging 4.3% growth per annum. Landlords have also reaped rewards, with prime central London rents rising from an average of £700 per week in Q3 2003 to £1,014 in Q2 2013 – a 44% increase, averaging 3.6% growth per annum.
Under King’s stewardship UK house prices have risen 3.8% per annum increasing from £128,251 in July 2003 to £167,912 in May 2013 (a 30.9% rise) according to Nationwide figures. King’s policies, which include lowering interest rates to a record-low 0.5% along with a programme of quantitative easing and the recent Funding for Lending scheme, have improved the flow of funds into the market, making mortgages more affordable.
The prime Central London market has also benefited from overseas investors keen to buy in the ‘safe haven’ of London amid political and monetary turmoil on the European and international stage.
Sue Foxley, head of research at Cluttons, said:
“During King’s reign the Central London market has experienced some extreme highs along with the occasional period of negative growth, especially following the 2008 crash when the market was starved of capital and mortgage lending plummeted.
“Since then, low interest rates have helped support the market, coupled with strong demand from overseas investors. As the new Governor Mark Carney arrives, we expect to see over 5% growth in prime Central London house prices this year, followed by increases of around 4% per annum between 2014 and 2018. Subdued rental growth is expected to persist this year with increases of 3% expected rising to 3.5% growth in 2014 and 4% growth in both 2015 and 2016.”
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