Pre-financial crisis here is how the UK property market worked: any uptick in prices would start first in London. Homeowners in the capital would see the price of their property rise; they would then cash in – sell up – and move into the country for better schools and quality of life.
This steady flow of people out of the city would help the London price surge turn into a gentle tide of rising values across much of the UK. In addition, those who had made money through rising prices would dip into buy-to-let, in areas where they saw potential high-rental yields – which helped spread the financial love further across the country.
But those days – at least for now – seem to be gone. London has become, as far as property is concerned, another country. "For a couple of years after the Lehman Brothers collapse people seemed OK to continue the pattern of cashing in on their London property and moving to the country, but this has not been the case now for a while," Ed Mead, a director at a London agents Douglas & Gordon, says.
"But people in the capital are so aware of the value of their property and they can see that London has became a magnet for international investors and that there is lots of money washing around.
"They have seen the value of their property – if they live in or near prime areas – rise hugely. Meanwhile, property in the country has been treading water at best.
"So, since 2008 you have seen your property in London going up by 30 per cent but outside the M25 prices are going down or hardly moving. As a result, you are more likely to hold onto your place in London as you see it as an appreciating investment," Mr Mead says.
Trevor Kent, a former president of the National Association of Estate Agents, has an agency in Gerrards Cross, prime London commuter belt and usually he would be among the first to feel the warm glow from appreciating prices in the capital, but not this time.
"What seems to be happening is that if people are moving in London they are doing it within London – a couple of miles down the road to take advantage of local price bubbles or are simply down-sizing," he says.
"One important point is that London schools have improved so that removes one incentive for families to move away. In addition, people are time poor and perhaps a little less keen to do the commute unless it makes financial sense."
Mr Kent says this is breaking the virtuous circle of London price rises leading to national property value growth. "In the past, you could almost trace the bankers' bonuses being paid in London and the people exiting the capital having sold their home. Now this isn't happening to anywhere near this extent.
"I think London should be taken out of the national house-price statistics – they give a false picture. It is now a separate market divorced from nearly all of the rest of the UK," he adds.
The average price of a property in London is about 70 per cent higher than the UK average, this doesn't reflect the true situation in much of the capital, as a very high proportion of purchases are made with cash so they don't count towards the figures complied by the likes of Halifax and Nationwide. When cash sales are factored in, as they are by the Land Registry, then the differential between London and the rest of the UK becomes much greater. The latest Land Registry figures show that London transaction prices are £371,223 on average compared to a national average of £162,080
And as if to emphasise just how separated London has become, even the usual festive sales lull didn't occur there this time around. According to property websites Move with Us, prices were up and selling time down in this normally moribund period.
"The London market exists in its own bubble and the most recent data shows the capital is even immune to usual seasonal trends. Rising asking prices, coupled with reduced selling times, is a clear sign of a strengthening market.
Ben Greco, a director at Move with Us, says: "This could have been caused by any number of factors – the multi-cultural nature of the buyers, the impact of foreign investors or a low supply of quality property for sale."
But there is some hope the rest of the UK will eventually share in this London largesse and not just in the traditional areas of buy-to-let or holiday home purchase.
"The market may be distorted but it's not completely broken. There will come a point – and it may be soon – when those with appreciating property in London will see they can buy an awful lot with their cash in the country," Mr Mead says. "It will then be seemed worthwhile by enough people to do the commute or escape permanently to the country and the ripple effect will start to kick back in."
And it's not all about London, as far as the fortunes of the rest of the UK are concerned. "The Bank of England's Funding for Lending scheme [designed to open the taps of lending] is having an effect in terms of mortgage availability and the rate of price drops in much of the UK is coming to an end," he adds.
However, there are concerns the current price growth in many parts of London – and there are already signs of it potentially slowing – will not continue long enough for the ripple effect to be felt in the rest of the UK. "Property in prime, central London and some areas outside the centre has become the world's biggest safe-deposit box," says Charlie Ellingworth, director of Property Vision.
"London would now be France's sixth-biggest city such is the influx. But this creates dislocation with lots of areas with blocks with no one living in them. And who is to say how long this will go on for? A sterling crisis, for instance, could put a stop overnight on this price growth."Reuse content