The capital of the United Kingdom traditionally leads the way when it comes to house price growth and as the year begins to grow to a close, London’s housing market shows no signs of slowing down – but with the rapid jump in price in recent months giving off warning signs of an unsustainable boom, there are fears that the capital may get caught in a housing bubble. There is variation across the city as some prices have fallen since the property crash of 2007 while others have risen a little and some have increased dramatically.
It is now just over a year since London hosted the celebrated Olympic and Paralympic Games and the Olympic effect is obvious to be seen in Hackney. Despite a backdrop of a subdued economy, the borough of Kensington and Chelsea recorded an impressive twenty percent increase in house prices over the last three years, far above average. However not all areas of London followed the trend as some fell into a downward spiral with the worst affected borough being Barking and Dagenham who witnessed across the same period a dip in their house prices of four and a half percent.
The fears that London might be overheating were confirmed last month when the capital’s house prices soared to a new high as October saw a ten percent month on month increase which significantly beat the previous record set in July. With Westminster, Chelsea, Kensington, Fulham and Hammersmith all recording increases in nearly twelve percent in seller’s asking prices over the month, compared to an average three percent across the rest of the country, the worry is that the prices will soon soar out of control.
Loft conversions in London are on the rise, with many homeowners opting to increase their living space rather than moving. A loft conversion will add around 20% in value to the average London home.
Key indicators this year have reached levels not seen since before the crash in the summer of six years ago and it believed that the troubles with the Euro are the root cause for the frenzied activity in parts of inner London which are causing the prices to increase so dramatically. Given all of the trouble with the Euro-zone, overseas investors are looking for a safe haven for their cash to be placed and London is a prime location. Chancellor of the Exchequer, George Osborne has been actively investigating imposing Capital Gains Tax on foreign owners of British property in a bid to tackle the problem and with the Treasury having already provisionally costed the measures; a final decision is likely to be announced in December.
Options do exist which seek to help the potential property owner in London including the Government’s flagship help-to-buy scheme, however this is seen by many as more of a help to the rest of the country because many Londoners would not be able to afford mortgage repayments on a house that might cost double the national average. If the property prices continue to grow irrespective of what is happening with wages, then affordability becomes a major issue for the average wage owner and no more so than in the country’s capital.