The London property market is expanding at an alarming rate and could be entering 'bubble territory', according to a new report. Home.co.uk explained the average price of a home in the capital is GBP 400,096 - a number that is set to rise even further. Indeed, values are now 15.3 per cent higher than they were five years ago, rising 11.7 per cent over the year. Greater London has now outstripped every other region - even the south-east - in terms of property prices, driven by high demand and a lack of stock.
Part of the problem is that the property crash didn't really hurt home prices in the capital, according to Home.co.uk. While this was good news for real estate investors, it has created an almost dangerous environment in the city at a time when the rest of the country is in recovery. Apart from a minor blip, prices in London have been rising steadily since the end of 2011. Values are now 63 per cent higher than the average home in England and Wales.
Worryingly, the flow of new stock coming to the London market is down 31 per cent on the last year. Potential vendors are holding back or choosing to take advantage of the strong rental market, as opposed to seeking sale. Since 2007, supply has dropped 78 per cent and now the average time a property spends on the market in the capital is just 75 days. This is compared to the median 113 days recorded across England and Wales.
Doug Shephard, director at Home.co.uk, commented: "London's housing bubble has come about through ever greater sums of cash chasing ever fewer properties over the last five years. Soaring prices may well be welcome news for homeowners who see their equity growing, but, on the flip side, they are highly troubling for potential buyers and create severe downside risk. The growth curve in prices over the last 12 months alone appears unsustainable, and the market metrics are not showing any signs of a slowdown in price growth."
Related: 10 areas around London where investment value can still be found
- Wednesday 30 October 2013