Reports reveal the stark contrast between London property and elsewhere in the UK
There is a stark contrast between the property markets in London and the rest of the UK with two new reports showing just how wide the gap has become in terms of prices, buyers and growth.
Firstly, in one of the markets most in demand, the prime property market in central London there are far more foreign buyers than domestic buyers. The latest quarterly report from Strutt & Parker shows that almost 44% of London buyers were foreign in 2013, while the rest of the country has remained overwhelmingly domestic, with just 5% of buyers coming from overseas.
‘We have seen Chelsea, South Kensington and Fulham assemble the most diverse spectrum of international buyers, while Knightsbridge is highly attractive to those from the Middle East. Kensington and Notting Hill has changed from being a more domestic market to an overseas hotspot, explained Stephanie McMahon, the firm’s head of research.
House prices show a similar picture with the prime market in central London being fuelled by overseas money. Land Registry figures for 2013 show that the median house price for England and Wales has increased annually by just shy of 1% to £168,000, while in Greater London the median price has increased by 6.7% and is now nearly £320,000.
However, the disparity between prime central London and the rest of the UK is not just confined to house prices and nationalities of buyers. Behavioural changes were also recorded by tracking the motivations of its buyers and sellers throughout 2013.
Some 52% of Strutt & Parker’s buyers in London are seeking property for their primary use, while this figures jumps to 87% outside of London. Investment properties outside of London also remained low, at just 4.8% of purchases made, with far more buyers seeking primary and secondary homes.
The main driving factor behind those selling in the prime central London market was for financial reasons at 24%, while in the country this figure drops to 12%. In the capital, 56% of buyers want a flat, whilst in the country a significant 90% are looking for a house. Finance was the top job sector amongst those choosing to sell through Strutt & Parker.
However, Strutt & Parker’s nationwide outlook for 2014 remains buoyant in both London and across the country. ‘We expect house prices to grow by 7% across the UK in 2014, and 6% in prime central London. During the latter part of 2014, we expect that price growth in 2014 will be more sensitive to prevailing political press and expectations due to the election and this will be even more pronounced in 2015,’ said McMahon.
‘However, the continuation of strong growth through the end of 2013 suggests the downward pressure might be less substantial in both of these years. On top of this, we expect sustainable growth to return through 2016 and 2017,’ she added.
Secondly, an analysis report from home.co.uk highlights the two opposing ends of the British market. Over the last five years, home prices in Greater London have risen by 27.8% while prices in the North East have fallen 5.8%. The mix-adjusted average house price in Greater London is £424,965 whilst in the North East it is £152,050.
The report says that the disparity is not limited to average prices. The typical time on market for property in Greater London stands at just 67 days, compared to 189 days in the North East. Moreover, the gaps are getting wider and wider.
The firm says that there has been a redistribution of housing wealth across the UK since the global economic crisis. Over recent years, prices have rocketed in London and the South East, taking home values to well above their pre-crisis peaks, whilst other regional markets such as the North East, the North West, Yorkshire and Humber, Wales and Scotland all still register negative price growth over the last five years.
According to Doug Shepherd, home.co.uk director, the flagship government Help to Buy scheme may well do some good in these regions, but more jobs would be much better for the regional economies. ‘Clearly, a one size fits all economic policy cannot work across such disparate markets. The North, Wales and Scotland need to see more stimuli and less austerity,’ he said.
‘However, aside from the gross economic inequalities between the North and South, the greatest danger lies in the fact that London and the South East alone represent more than half the value of the English private housing stock. The Greater London property bubble is now spreading out into the South East and East Anglia, and should these property markets crash, they will take down the rest of the country with them,’ he explained.
‘The Bank of England is currently stress testing UK mortgage lenders to see if they could withstand such a catastrophe, but I think we already know that it very much depends on how far prices fall and that, in turn, depends on how far they are inflated in the first place. Rebalancing property equity between the North and South would go some way to achieving a safer and more sustainable housing market,’ he added.