Asking Prices for homes in Greater London have reached a new record level following the latest huge monthly rise of 1.5%, reveals the latest Home.co.uk Asking Price Index report. The average value of property on the market in the Capital, not including £1million+ properties, now stands at a staggering £336,900. So what is driving London's housing market so hard that every day the average property owner gains around £180 of increased capital value?
Despite four recent interest rate hikes, London asking prices are rising relentlessly, at a rate that now exceeds that observed in the last wild run up to 2004. The prices of houses on the market in London rose 7.0% over the last 6 months alone, which corresponds to a massive annualized rate of over 14%.
To understand how the London market entered this new phase of spiralling price rises we should take a look at the recent price history. Asking prices last peaked in July 2004 when the Capital's then overheated property market stalled as buyers were priced out. Sellers, pricked by reality, were then forced to reduce their asking prices to entice buyers back into the market, causing asking prices to decline steadily for two years and thus the froth was cleared away. This correction ended with, what many housing pundits declared, a 'soft landing' around 12 months ago but with the benefit of hindsight, a cut in interest rates in 2005 and a booming financial services sector 'rebound' might be a better description.
The report from Home.co.uk goes on to highlight the importance of these markets to the UK property market. "Fierce competition for London property naturally spills over into the South East where house prices can actually look like relatively good value to priced out Londoners. Consequently market sentiment and house price inflation in the South East is second only to that of the Greater London powerhouse, with asking prices rising at a more moderate 3.1% over the last six months. Taken together, these two housing markets account for 30% of the property in England and Wales. Exclude their growth figures and the remaining 70% of the property market in England and Wales is simply marking time with annual growth currently around a mere 3% per annum."
Greater London's recent meteoric rise in asking prices since Aug 06 has been both spectacular and surprising in its vigour. "Take a look at the roller coaster graph for Greater London." urged Doug Shephard, Business Development Director for Home.co.uk. "Asking prices are going ballistic and thus far we see no signs of a slow down in this market despite growing pressure from interest rates." Having taken flight, the big questions for the Greater London housing market are 'How long can prices continue to rise like this? Should the London market stall again, as it did before, what will the downside be like and will it bring the wider UK property market crashing down with it?'
The Home.co.uk Asking Price Index reports may be viewed at http://www.home.co.uk/asking_price_index/
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