House prices outside London are still 16% below their 2007 peak and have only just recovered to the level they hit 10 years ago, according to figures which underline how much the boom in the capital has skewed headline figures.
Analysis of September’s Land Registry data by property investment firm London Central Portfolio shows that although average prices in England and Wales reached £177,299 during the month, once greater London’s market is stripped out, the figure stands at £133,538.
This is 16% lower than in December 2007, when homes were changing hands for an average of £158,494, and the typical price paid in 2004, when the last boom was under way.
LCP said if prices continued to grow at the current rate of 3.1% a year, it would take another five years for them to reach their pre-crisis level. The firm said fears of a national house price bubble had been wildly premature and that the Land Registry’s headline figures, which showed 0.2% drop across England and Wales in September, understated the “truly gloomy” picture for the national housing market.
Naomi Heaton, the CEO of London Central Portfolio, said: “Residential property prices in the UK move in cycles. Periods of growth are generally followed by periods of consolidation. We should expect to be entering a new growth cycle given prices are only at the same level as 10 years ago and are, without doubt, suppressed currently. They will inevitably start moving rapidly when sentiment improves and there is clarity over interest rates. This should be welcomed as a sign of economic confidence, not a harbinger of disaster.”
In recent months there have been signs that the London market has started to cool, with asking prices for new properties coming onto the market starting to fall, and estate agents reporting more sellers than buyers after a long period of high demand for homes and short supply.
Figures from property firm Knight Frank show that at the top end of the London market prices stood still in October, ending four years of uninterrupted growth, a change it said was driven by “a mood of caution” before a potential change of government in next year’s election.
Its prime central London index, which focuses on the capital’s most upmarket neighbourhoods including Belgravia, Kensington and Hampstead, showed that the three-month rate of growth had fallen to 0.7%, from 1% in September and 2.4% in May, while the annual rate of change fell to 6.5%, from 7.4% in September.
The firm said it expected zero growth in central London house prices throughout 2015, although if the prospect of a mansion tax on homes costing more than £2m – put forward by both Labour and Liberal Democrats – recedes, this could prompt modest growth in the second half of the year.
The slowdown in prices come after an extraordinary run. Knight Frank said prime London prices had grown by 40% in the four years to October, exceeding growth of 15% in the UK mainstream market and a 9% fall in the price of gold. Homes that cost £1m in November 2010 now change hands for £1.56m, it said, while those costing £10m four years ago are now worth 27% more.
Tom Bill, the head of London residential research at Knight Frank, said: “The positive run began in November 2010, the same month Ireland became the second European country after Greece to receive a bailout as concerns grew over the future of the eurozone.
“Ireland has since left its bailout programme and the economic risks that drove buyers into the safety of London property have been superseded by political risks that have created a mood of caution. As a result there is growing evidence that asking prices are having to adjust to more subdued market conditions.”
