The figure below shows that the value of homes in Kensington & Chelsea has rocketed since early 2009. Low mortgage rates have supported demand in the prime property market – for those individuals who can afford to put down a deposit.
House prices in the capital rose by 0.4% between July and August, which marks three consecutive months of house price growth. Prices across all regions rose slightly faster by 0.6% over the same period, highlighting that recent price increases in the capital are starting to impact affordability. Over the year, London house prices are up 1.0% in August compared to an annual fall of 1.4% across all regions.
House prices in the capital are now only 2.5% lower than their highest ever point, set in February 2008. This compares with a 9.5% peak-to-current value fall for the country as a whole.
Over the last three months, London house prices have risen by 1.5%, which in cash terms, equates to a monetary increase of £5,100. The pace of monthly house price increases have typically surpassed other regions of the UK, although prices only increased by 0.4% over the month to August 2011. This underlines that houses are becoming increasingly expensive in London, which has supported demand for renting in the capital.
CEBR expects house price growth in London to accelerate in the coming months, as the capital remains relatively unaffected by the impending public sector cuts.
House price growth stayed positive for the fourth consecutive month in August which indicates further strengthening in the market.
House prices are 1.4% lower in August 2011 compared to last year. The top 20% of the market has seen flat growth of 0.5% over the year to August. The bottom-end has seen prices fall by 5.5% over the same period.
CEBR expects the divergence in growth between the top and bottom to continue into next year as weakness in the mortgage market affects low-end property prices.
The average price of a property in the UK is £177,245, which is 9.5% lower than the peak in Q1 2008. In London, prices have risen for three consecutive months to finish 1.0% higher in August compared to last year.
Overall, the housing market has performed relatively well in recent months, despite an increasing number of people turning to the rental market. For those who can afford the deposit, low mortgage rates are keeping affordability attractive.
Robert Bartlett, Chesterton Humberts’ CEO, comments:
“This month’s House Price Poll of Poll results highlight two key elements: that the chronic underlying stock shortages in prime central London are forcing prices higher in these areas, with average prices in Kensington & Chelsea breaking the £1m mark for the first time and foreign investment into the capital is still at the forefront of driving price growth.
“The increasing price of gold is indicative of the flight to hard ‘haven’ assets and the increasing value of prime central London property is related to the global demand for secure investments with good long term capital appreciation dynamics. Unlike gold though, you can live in a house, making property the investment class of choice in such testing economic circumstances.”
Douglas McWilliams, Chief Executive of CEBR, comments:
“This month’s results show that the foundation for stable prices remains firm, and in some areas of the country, the lack of supply has kept prices on an upward path, notably in the capital, where the value of prime property is reaching historic highs thanks to strong overseas demand and low interest rates.”
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