London House Prices Still 3x Higher Than National Average Despite Slowing Inflation In The Capital

Although house prices continue to rise across the UK, recent reports by Reallymoving and Search Acumen suggest that growth in London is lagging behind other areas of the country.

Analysis of official data by Search Acumen shows that the largest growth areas are concentrated in the North West (15.2%), Wales (13.3%) and North East (11.8%), while London has seen a marginal growth of 5.2% over the same period, making it the slowest growing region since 2020.

Search Acumen also found that for the first time ever more than half of houses purchased in excess of £1million are now located outside Greater London. This means that the capital’s share of high value residential properties has shrunk from 58% in 2018 to 48% so far this year. Similarly, more than two thirds (68%) of house purchases above £500,000 are now taking place outside the capital, compared with 61% in 2018.

But although inflation has stalled in the capital, house prices there remain much higher than the commonly regarded national average of £250,000. Reallymoving’s report reveals vast but important regional differences when it comes to house prices. Reallymoving’s report suggests that 85% of buyers in the North East are paying less than £250,000, and those in London are paying three times more.

Inflation also depends on buyer status, says the Reallymoving report, with equity-rich upsizers seeing lower inflation rates in London, the South and East of England compared with the rest of the country. This is likely to be due to a drop in demand, with many now preferring to move outside the capital for better work-life balance. First time buyer inflation is also generally lower at 2.5% annually due to first time buyers generally purchasing cheaper properties and needing to rely on a mortgage.

Rob Houghton, Chief Executive of Reallymoving commented on the findings that, “average property price data is not helpful without context, so we have looked at property prices and inflation by location as well as by category of mover”.

Andy Sommerville, Director at Search Acumen, also said that while recent data analysis might not

indicate the kind of levelling up that the Government had in mind, it does suggest that “the property market is being reshaped by recent political and economic events, including Brexit alongside Covid-19, and policy responses such as the Stamp Duty holiday”.

“London’s monopoly on higher value homes has come to an end, and legal firms across the country will find themselves dealing with increasingly high-stakes transactions”, he added.

But while rising house prices remain a challenge for first time buyers, especially in London and the South, low mortgage rates and increasingly competitive lenders are opening up the market and creating more options for new homebuyers.

Rob Houghton, Chief Executive of Reallymoving said:

“Our new property price analysis by home mover type shows that despite a seemingly unusual year in the property market, there are plenty of opportunities this year for those who want to move, even after the Stamp Duty holiday has ended.”

But other challenges across the property market continue to play out, particularly the fact that housing demand continues to outstrip supply. Tom Bill, Knight Frank’s head of UK residential research, commented, “the number of UK exchanges in July was 21% below the five-year average, a number that is unsurprising given the scramble to complete in June”.

“However, the number of new prospective buyers was 42% higher than the five-year average, showing how much demand remains in the system. Meanwhile, the number of instructions to sell was down 28% over the same period, demonstrating how supply and demand headed in opposite directions in July,” he said.

Nevertheless, Bill predicts that the imbalance should be short-lived.

“It does not feel economically feasible for this mismatch to survive beyond the summer, particularly against the backdrop of low mortgage rates and a recently-upgraded IMF economic forecast for the UK,” he commented.

A return to pre-covid normality also feels imminent, he says which should see “more sellers should come forward once they have taken a summer holiday if they sense Covid is moving into the rear-view mirror”.

But the house buying process can still be as difficult and painful as ever, says Sommerville.

“It’s becoming more and more common for buyers to part with significant amounts of money to move up the property ladder, with almost one in five homes having a price tag of at least £500,000. But despite all this investment, the process of buying a house is still stubbornly stuck in the past, with premium prices accompanied by the same stress, angst and uncertainty that has plagued the market for years”, he said.

“With increasing sums at stake, it’s woefully inadequate that transactions can still hang in the balance for weeks or even months after an offer is accepted, while legal firms wait for information to complete due diligence,” he added.

In today’s fast-moving property market, assistive products such as insurance can help to drive the conveyancing process forward. Lawsure can help practitioners find the right products for clients, such as no search indemnity insurance, amongst a range of other title protection and wills and probate insurance products designed to reduce risk and pressure in stressful transactions.

DISCLAIMER:  Nothing said in this article constitutes legal or other professional advice and no warranty is given nor liability accepted for the contents of this article. LawSure Insurance will not accept responsibility for any loss suffered in consequence of reliance on information contained in the article.