How long can the London housing boom go on?
Written by By Harvey Jones
Price growth has been fuelled by wealthy overseas buyers who need to protect cash
Nothing lasts forever, but right now, the London property boom looks unstoppable.
At current rates of growth, the average prime central London flat could cost £36 million by 2050, according to research from London Central Portfolio.
Cynics will see that frothy predictions as a sign that London property madness has reached its zenith. So how long can it go on?
After rising almost 20% in the last year, London has lost grip on reality, says Oliver Atkinson, director of online estate agents urbansalesandlettings.co.uk. “Prices in the capital are bordering on the doolally.”
House price growth has been fuelled by wealthy overseas buyers using prime London properties as a safe place to store their capital, says Martin Stewart, director of mortgage broker London Money. “The tidal wave created from this influx of foreign capital is now reaching out to the commuter belt. Many young people have no chance whatsoever of getting onto the ladder in London.”
Prices are now 20% higher than before the financial crisis, as soaring demand meets a dwindling supply of properties, says Alex Gosling of online estate agents Housesimple.co.uk.
“With around 25 buyers for every property, only those willing to smash the asking price can win the race.”
London homeowners can pretty much name their price. “We are seeing a significant number of properties going for above asking price, and in some cases tens of thousands of pounds above. The worry is that buyers, in their desperation, are over-stretching themselves,”
The average London property costs around £415,000, according to Land Registry figures, against an average cost of £170,000 across England and Wales.
London has now become a country within a country, says Jonathan Samuels, chief executive of Dragonfly Property Finance. “For average prices in the capital to be more than twice that of the rest of the UK underlines the extent of the divide.”
Buyer confidence is in danger of tipping into over-confidence. “If house prices dip and interest rates rise, things could get especially messy.”
Samuels says buyers should stay calm and avoid borrowing more than they can afford to repay if interest rates rise significantly. “But the signs are this is happening less and less.”
By Harvey Jones