House values in London did slip between 2007 and 2011 but it has now become clear that this period of uncertainty resembles more a short-term blip than a true property crash, according to data from Home.co.uk.
The average asking price of a home in London has broken through the £400,000 barrier for the first time.
A huge annual rise of 11.7% brings the average price to an eye-watering £400,096.
Relentless demand to live and invest in the region has driven prices 15.3% higher than when the financial crisis struck five years ago. No other UK region, not even the South East, comes close to the performance of the Greater London property market over this period.
Seasonal fluctuations aside, prices in the capital have been rising steadily since the end of 2011 and are not showing any signs of slowing – quite the contrary.
The London market is a law unto itself and prices are now 63% higher than the average home across England and Wales, the highest differential recorded to date. Looking across the UK, the South East is the next best performing region but price growth there over the last five years is only 9.4%, much less than that achieved in Greater London.
Demand has played a strong role in the price performance but the key underlying driver is a severe lack of supply. The flow of new property stock to the London market is down 31% on last year as potential vendors hold back or place their properties on the strong rental market. Since 2007, the supply of property for sale has fallen 78%. As a consequence, the typical time on market for London properties is just 75 days, compared to a median of 113 days (+51%) across England and Wales. However, marketing times in London are still somewhat higher than they were during the boom years when the typical property was on the market for just 50 days.
Doug Shephard, director at Home.co.uk, said: “London’s housing bubble has come about through ever greater sums of cash chasing ever fewer properties over the last five years. Soaring prices may well be welcome news for homeowners who see their equity growing, but, on the flip side, they are highly troubling for potential buyers and create severe downside risk.
“The growth curve in prices over the last 12 months alone appears unsustainable, and the market metrics are not showing any signs of a slowdown in price growth. The overriding concern is that further stimulation from the Help to Buy scheme will only expand the bubble even further by increasing the amount of demand in a market plagued by limited supply.
“The reality is that, based on average prices, buyers can now purchase two properties elsewhere in the UK for less than the price of a single property in London. For example, acquiring a property in the East Midlands plus one in Scotland would still leave change of over £58k, compared to the average price in the capital. The likelihood of a surge in new supply to help keep prices in check is very low in the near future. However, by their very nature, all investment bubbles pop eventually. It’s just a matter of time.”
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