London Drives House Prices to Record as Buyers Flock to Market
London prime property buyers “pouring” money into the U.K. capital helped drive the country’s house prices to another record in June, Acadametrics Ltd. said.
Nationally, values rose 0.2 percent from May and 2.5 percent from a year earlier, the London-based real-estate researcher and LSL Property Services Plc (LSL) said in a report today. Prices have now increased for 10 consecutive months on their measure to an average 232,801 pounds ($352,000).
The combination of buoyant international demand for London homes and loosening mortgage availability aided by Bank of England and Treasury measures have stoked prices across a number of U.K. real-estate gauges. Such indexes also mask the divergence between London and much of the rest of the country, where property values are still recovering from the aftermath of the 2008 financial crisis.
“The plethora of attractive mortgage deals on offer is working wonders and wider pools of buyers are flocking to the market,” said Richard Sexton, director of LSL’s e.surv surveyors. In London, “money is pouring into prime areas from cash buyers and international investors looking to store their wealth in bricks and mortar.”
House-price inflation in the U.K. capital is about 2 1/2 times that of the rest of the country, Acadametrics said. The main areas of increase elsewhere are in regions near London such as the southeast of England.
“The market still has a long way to go before it reaches its pre-2008 health,” Sexton said. “Sales figures for June 2013 are below the level of the previous three years, and first-time buyer numbers are still low outside the southeast.”
The Acadametrics report chimes with other housing indexes that showed increasing prices in June. Hometrack (UKHMMM) said on July 1 that values rose 0.4 percent, while Nationwide Building Society put the gain at 0.3 percent.
Chancellor of the Exchequer George Osborne’s Help-to-Buy program, combined with the Bank of England’s Funding for Lending Scheme, have stoked mortgage availability at a time when the banking system’s lending potential remains impaired. Mortgage approvals reached 58,242 in May, the highest since 2009.
Osborne defended his program yesterday, rejecting concerns that it may create a house-price bubble.
“It’s a three-year scheme,” he told Parliament’s Treasury Committee. “I don’t want to create uncertainty that it might suddenly end early. It’s hard to see given the current financial climate that it would fulfill the fears that the committee has expressed.”
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