House prices rising at ‘insane’ pace in London
House prices are growing at a ‘borderline insane’ rate in London, said one property expert in the aftermath of the latest figures from the Office for National Statistics.
The capital saw house prices increase by an eye-watering 20.1 per cent over the last year, almost double the 10.5 per cent nationwide figure.
In reality the gap is even larger, as the national figure for house price growth is hugely distorted upward by the London data.
Jonathan Samuels, the chief executive of Dragonfly Property Finance, called such runaway growth crazy.
“Despite recent talk of the London market cooling, these figures show that London and the South East have been driving house prices across the UK,” agreed Stephen Smith, director of housing and mortgages at Legal & General.
“Excluding these regions, UK house prices rose minimally in May compared to April’s figures. However, the overall picture indicates that, when taking all regions into account, London and the South East are significantly strengthening the regional divide in the market.”
The reasons for London’s rise are fairly self evident, with the job market in the capital still far healthier than other parts of the UK.
Peter Rollings, CEO of Marsh & Parsons, said: “Renowned worldwide as a hub for business, investment and culture – London has always enjoyed unrivalled popularity as a place to live and work in, and this demand has fuelled growth on an entirely different trajectory to the rest of the UK.”
Excluding London and the South East, annual house price growth was at 6.4 per cent, a markedly more modest figure.
However, prices did go up in every region, except for Northern Ireland. Wales saw a 6.5 per cent rise, while Scotland’s prices rose by 3.6 per cent.
According to the index, the average price of a UK home is £262,000.
The statistics from the government are widely regarded as the most trustworthy as they rely on actual sold prices, rather than estimates. However, this means they are two months behind so are not always accurate for predicting trends.
Alexander Gosling, managing director, online estate agents Housesimple.co.uk, said: “There is a greater sense of sanity elsewhere in the country, with sustained rates of growth now spreading even to the areas worst affected by the slump.
“Despite what many had assumed, the second Help to Buy scheme is having only a minor impact on the market. The real drivers are cheap money and ultra-confident consumers who risk convincing themselves that the only way is – and will continue to be – up.”
“The drumbeat portending raised interest rates is getting steadily louder, but for now it is fanning the flames of demand as people rush to snap up cheap mortgages while they’re still available. Help to Buy may not be the villain it was painted as; the main driver of rising prices is unbridled optimism, and that cannot last forever.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, predicted that the first interest rate rise won’t come before the middle of next year at the earliest.
However, he added that borrowers should be aware that fixed-rate mortgages are becoming steadily more expensive and will continue to do so.
This may not be the disaster some expect though, as five-year fixes are still available for a little over three per cent, a historically low rate.
“Borrowers might want to secure a fix now though if they need certainty rather than waiting several months to see what happens,” suggested Harris.
“Ultimately, there is only one way for interest rates to move and that’s upwards – it’s a question of when this will happen.”
By Phil Scullion Follow @philscullion