House Prices have only just reached the heights attained in 2004, when properties outside the Capital are omitted, as Septemberís Land Registry data reveals a 16% deficit between current average property values and their peak in 2007.
A new study conducted by prime property firm, London Central Portfoilio (LCP), questioned the validity of the assertion made within official housing data for September that average house prices stood at £177,299, stating that when Londonís houses are taken out the equation, the revised figure, in absolute terms, stands at just £133, 538 pointing to the distorting impact Londonís booming property market has on housing data.
This is 16% short of the peak price seen before the financial crisis of 2008, £158,494, and even more when inflation is accounted for.
In real terms, this marks a 35% decrease on the amount an average buyer could expect to part with for a property outside London, which soothes fears over a nation-wide UK housing bubble but hints at the unsettling influence of cash-rich foreign oligarchs on the capitalís market. These wealthy non-nationals appear to have capitalised on the attractiveness of Londonís property scene as a refuge for their dubious troves of wealth, however this is primarily a concern for banking institutions in their own countries rather than the FCA.
LCP implied the Land Registry Data belies the depth of the murkiness underpinning the UKís housing market, going on to state that only if annual house price growth continues at 3.1% for the next 5 years will average UK house prices outside the capital reach their 2007 peak.
Naomi Heaton, the CEO of London Central Portfolio, said: ìResidential 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.î
ìThey 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.î
ìThese figures suggest that housing stock outside of Greater London is still affordable. The slow recovery indicates that positive economic sentiment and the feel-good factor are still missing.í
Ms. Heaton urged policymakers to remain calm in the face of panicky reports over a UK housing bubble, playing down widespread house price growth as a potential factor in a premature interest rate hike. Rather, that such talk is ëtotally unhelpfulí due to how much of a skewing effect London house prices have had on housing data.
Current mortgage rates are at all-time lows with lenders constantly undercutting each other in order to attain greater market share. The average 2-year fixed rate mortgage stands at 2.46% for borrowers with 25%+ deposits, and borrowers with 10% deposits are being offered the best ever loan-value fixed rate mortgages across the board.
This price war between lenders appears to have started following the Bank of Englandís announcement that interest rates are likely not to rise until the middle of 2015. It also follows tougher lending criteria specified in Aprilís Mortgage Market Review (MMR) and the BoE being imbued with fresh powers on the imposing of loan-value restrictions on borrowers coupled with their obligation to stress test borrowers to see how they would cope with repayments if interest rates rose by 3%
All these factors contributed to a stuttering in the amount loaned out over the middle part of 2014, with lenders thought to be seeking to make up for lost time with their prolonged proffering of good value rates.
Despite these affordable rates, there have been clear indicators in recent months that the London property market is losing steam, as asking prices have fallen as a result of greater supply than demand for the first time in recent memory. Moreover, uncertainty over an interest rate hike combined with public disillusionment over poor real wage growth in line with rising property prices has served to further dissuade buyers from entering the market.
The prospect of a new government next year has further swayed would-be buyers from entering the market, and the Labour-backed mansion tax on £2m+ homes could spark house price growth in London next year. The overarching message from the LCP is a UK house price bubble is not a realistic possibility and that consumers ought to be steadfast in their economic ventures, with the latest housing data being indicative of economic growth rather than doom and gloom.
The BoE reported last month that approvals for home loans for houses across the UK had fallen to a 14 month low of 61, 267.
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