London prices rising unsustainably
This is according to the latest Rightmove House Price Index which monitors changes in house prices in England and Wales both annually and monthly.
The Index shows London storming back from a summer of low listing activity and price falls, with new seller numbers up 15% and asking prices up +10.2% (+£50,484) on September.
The average asking price in the capital is now +5.6% (+£28,852) above July’s record of £515,379, an average growth rate of around 2% a month over the quarter.
Miles Shipside, Rightmove director and housing market analyst, said: “Fewer sellers coming to market in the capital during the traditional summer recess resulted in total price falls of 4.3% over August and September. However, this month’s rebound in the number of sellers brings the quarterly growth figure back into line with the recent trend at around 2% a month.
“Although not sustainable in the longer term, some agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare. Unsurprisingly, many of this month’s best performers are boroughs in inner London.”
However there is no risk of a price bubble outside London as two regions have recorded monthly falls (West Midlands and Wales), five are negative year-on-year (North, North West, Wales, West Midlands, South West), and seven in ten regions have annual price rises lagging behind inflation, (all bar London, South East and East Midlands are below the 3.2% annual rate of RPI) according to Rightmove.
Shipside commented: “With the London market failing to provide the range of affordable properties its growing population needs, the South East is experiencing upwards price pressure as demand spills over.
“With an average price of just over £300,000, a commuter-belt property is in the cross hairs of Help to Buy assisted purchasers unable to afford the London market. Help to Buy will give some people a leg up onto the South East’s property ladder but it also needs to spur more first-time movers to trade up to increase property supply and temper future price rises.”
Ben Thompson, managing director of Legal & General Mortgage Club, said: “Concerns that the overall UK housing market may be overheating already are somewhat premature, especially when you consider where the market was 12 months ago. It was evident that some kind of stimulus was required and various initiatives including Help to Buy along with growing confidence in the economy have combined to boost house prices.
“According to our latest Mortgage Mood data one third of prospective homebuyers in the UK feel more confident about buying a house than they did a year ago and this is particularly true of Yorkshire and Humber (44%), the South-East (42%), and the North-West (42%). Of course in certain parts of the country prices have risen far more quickly than in others. Additionally, spiralling house prices are not good for those wanting to enter the housing market. Steady growth, broadly in line with inflation is preferable for a more stable, secure and fair housing market.
“Even so, it must be remembered that the stimulus is designed to help all parts of the UK and that Help to Buy is a temporary measure. If the Government needs to change its terms or withdraw it altogether to avoid the market overheating they can do so, and quickly if necessary.”