The latest house price data released on Tuesday by the Office for National Statistics (ONS) shows property prices continue to accelerate, growing by 6.1% in the year to September 2015.
That’s up from a 5.5% increase in the year to August 2015 and the strongest rate of growth since March. In London — where analysts, including Deutsche Bank, say there’s a housing bubble — prices increased by 7.2% in the year to September.
That growth was eclipsed by price increases in Northern Ireland (10.2%), the east of England (8.4%), and the south east (7.4%).
But an incredible — and depressing — chart produced by upmarket property agent Savills today shows that if you take the long view, London property price growth is outpacing the rest of Britain by a wide margin.
London house prices are over 50% higher than their pre-2008 financial crisis peak after an incredible rise that began around March 2012. The average London house price in September stood at £531,000, compared with a national average of £299,000.
The ONS gives a simple explanation: “An ongoing shortage of supply coupled with strengthening demand may be behind this increase in the growth rate.”
There just aren’t enough houses and people keep flocking to London as a place to work, despite the government’s attempts to create a “Northern Powerhouse” that will rebalance the country,
Neal Hudson, associate director at Savills research, says in an emailed statement:
The continued growth in the ONS house price index highlights the impact of increasing competition by mortgage lenders on a low stock housing market. Potential buyers that have a deposit are benefiting from historically low mortgage rates, increasing net lending, and are now able to borrow record high multiples of their income. That is despite the introduction of tougher affordability tests following MMR last year.
Price growth in the capital had already dislocated from the rest of the country by March 2012 and the closest price rises to London are in the South East and East, but these are just around 20% higher than their pre-crisis peak.
The September 2013 launch of the government’s Help to Buy scheme, which made it easier for first-time buyers to get on the ladder, coincides with an uptick in price growth across the UK but a particularly vertiginous rise in London that lasts around a year.
There are fears now that London’s accelerating housing market, coupled with government policies that will reduce social housing, could drive out 26,000 households a year, including those in key professions such teaching and nursing.
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