Residential property prices in London up over 10% year on year

House prices in England and Wales increased by 0.4% month on month and 5.6% year on year in October, taking the average value to £186,350, according to the latest data, but much higher in London.

On a regional basis London experienced the greatest increase in its average property value over the last 12 months with a rise of 10.6%, well above other parts of the country, the figures from the Land Registry show.

The North East saw the greatest monthly growth with an increase of 1.9% while Yorkshire and the Humber saw the lowest annual price growth at 1.4% and the most significant monthly price fall with a decline of 1.8%.

Sales and repossessions during August 2015, the most up to date figures available, show that the number of completed house sales in England and Wales decreased by 15% to 74,596 compared with 87,895 in August 2014.

Repossessions in England and Wales decreased by 54% to 376 compared with 826 in August 2014 and the region with the greatest fall in the number of repossession sales was Yorkshire and the Humber.

The data also shows that the number of properties sold in England and Wales for over £1 million decreased by 13% to 1,280 from 1,473 a year earlier.

Adrian Gill, director of Reeds Rains and Your Move estate agents, pointed out that the average price of a home in London is now above half a million and already rising in value much faster than elsewhere across the country.
 
‘In addition, the reverberations from last year’s stamp duty surprise are still echoing around the market, and million pound property sales have suffered significantly,’ he added.

Regarding future price increases, he also pointed out that only time will tell whether the extra 3% stamp duty levy on buy to let and second home buyers will affect the market.

‘In the meantime, there will be a scramble for second home purchases before the April deadline, which will only amp up the existing competition between landlords and first time buyers in the housing market,’ he said.

‘While intending to help more households get that crucial foothold onto the ladder, the Chancellor may find himself responsible for pushing up prices in the short term, and pricing out many prospective homeowners, despite the other initiatives in place. Any hit against the supply of rental homes will hurt tenants’ finances, and delay their realisations of home ownership,’ Gill added.

Rob Weaver, director of investments at property crowdfunding platform Property Partner, believes that although the prime central London market seems to be faltering partially due to affordability and last year’s stamp duty changes, the outer boroughs are powering ahead, driven by regeneration in places like Thamesmead and Newham, and of course, the Crossrail effect.

‘This is clear evidence that the UK housing market is incredibly diverse across the regions, highlighting a north-south divide with Yorkshire and The Humber seeing a relatively tiny annual increase. However, the issue of supply still hangs around like a bad smell despite the Chancellor’s attempts on Wednesday to help first time buyers with tax raids on second homes and buy to lets,’ he explained.

‘Landlords have become an easy target, hit by a double whammy, first in the Summer with a cut in mortgage tax relief and now with a hike in stamp duty next April. The surcharge people will have to pay for the average London buy to let property will effectively double. There are fears this could be trigger a rush to buy before April's deadline, freezing out first time buyers even more,’ he added.

Jonathan Hopper, managing director of the buying agents Garrington Property Finders, pointed out that London property is once again making money faster than most of its inhabitants can earn it with the average home price in the capital jumping in value by more than £3,400 in a month.

He also pointed out that sales in London are down by a fifth in a year, and squeezed supply has sent annual price growth rocketing back into double digits and the drop in sales is particularly acute in the £1.5 million to £2 million price bracket that was hit so hard by last year's rise in Stamp Duty. Here transactions are down by more than a third as buyers balk at the likely tax bill and would-be sellers hold off.

‘Outside London, the North/South divide remains largely intact, with a notable exception in North East England, where a recent spell of bullishness is now verging on over exuberance. With average prices up 1.9% in just a month, some sellers are starting to get carried away with asking prices,’ he said.

‘This week the Chancellor announced a raft of incentives designed to get Britain building more homes. With the shortage of supply now endemic in several areas, these measures can't come quickly enough. With consumer prices still falling and the Bank of England in no hurry to raise interest rates, the cost of borrowing will stay low and buyer confidence high well into 2016,’ he added.

‘Together these factors will continue to stoke demand well beyond what current supply can meet. The inevitable result is continued inflationary pressure,’ he concluded.