13th May 2013
Demand for property in London has grown three times faster than supply over the first three months of the year indicating London is nearing levels last seen pre-financial crisis writes Philip Scott.
According to property website Hometrack, in the capital, where demand is far outstripping supply, the average time on the market for a property is almost half the national rate at 4.6 weeks, a level last seen in October 2007.
In addition, the group’s says in the capital the proportion of the asking price achieved now stands at over 95%, again at a level not seen since summer six years ago.
But Justin Urquhart Stewart, marketing director of Seven Investment Management warns that the UK property market could be facing very bad news in the medium to long term. He points to Bank of Ireland’s actions at the start of May where overnight the lender doubled its tracker rate, walloping some 13,500 UK borrowers with substantially increased repayments.
He said: “A hand grenade has gone off but we are waiting for the bomb. In terms of Bank of Ireland’s move a borrower with a £100,000 mortgage could need to drum up an extra £160 a month. What happens when in two to three years when the UK government ups interest rates and thousands face higher repayments.
Urquhart Stewart says the government needs to address the issue of the dire need of more affordable housing. He adds: “The UK has really only been a nation of homeowners for the past 40 years, renting was very common prior to then. The government needs to look at potential solutions such as assured tenancy, where contracts between landlords and tenants are long term, offering people more security.
“We are in a position where small terraced houses in central London are selling for £1m. We haven’t seen a real-property crash in the UK as of yet. And when interest rates start to rise, they may do quite quickly. This could cause very significant financial difficulty for homeowners.”
In regards to the broad picture, according to the latest data from Halifax, part of Lloyds Banking Group, UK house prices increased by 1.1% last month compared to March, making properties some 2% up on 12 months previous. The latest figures give the average home a market value of just over £166,000.
However, the high prices and lack of mortgage availability have led to predictions that the UK may once again become a nation of renters. It is clear that insurance companies are increasingly interested in the sector. The latest talk was of an investment by Aviva reported on Reuters reported that Aviva is in negotiations to enter the rental market.