Property market: London's strength is not a foundation for UK-wide recovery

When it comes to the property market, the capital is like another country, with rising prices and speedy selling times

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."

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
The cartoon produced by Bruce MacKinnon for the Halifax Chronicle-Herald on Thursday, showing the bronze soldiers of the war memorial in Ottawa welcoming Corporal Cirillo into their midst
news
News
peopleFox presenter gives her less than favourable view of women in politics
Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into disastrous conflicts
News
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
PROMOTED VIDEO
Property
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
property
Voices
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
News
i100
Arts and Entertainment
Taylor Swift performs at the 2014 iHeart Radio Music Festival
musicReview: 1989's songs attempt to encapsulate dramatic emotional change in a few striking lines
News
Mario Balotelli has been accused of 'threateningly' telling a woman to stop photographing his Ferrari
peoplePolice investigate claim Balotelli acted 'threateningly' towards a woman photographing his Ferrari
Arts and Entertainment
Paul Anderson plays Arthur Shelby in Peaky Blinders series two
tvReview: Arthur Shelby Jr seems to be losing his mind as his younger brother lets him run riot in London
Voices
Don’t try this at home: DIY has now fallen out of favour
voicesNick Harding, who never did know his awl from his elbow, is glad to see the back of it
Arts and Entertainment
Miranda Hart has called time on her award-winning BBC sitcom, Miranda
tv
Sport
Phil Jones (left) attempts to stop the progress of West Bromwich Albion’s James Morrison on Monday
I'm not worried about United's defence - Chelsea test can be the making of Jones and Rojo
Arts and Entertainment
Saw point: Bradley Cooper and Jennifer Lawrence in ‘Serena’
filmReview: Serena is a strangely dour and downbeat affair
Life and Style
The Zinger Double Down King, which is a bun-less burger released in Korea
food + drinkKFC unveils breadless meat beast
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

    £350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

    Chief Financial Officer

    120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker