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


Actress sees off speculation about her appearance in an amazing way

Arts and Entertainment
Serge Pizzorno of Kasabian and Noel Fielding backstage at the Teenage Cancer Trust concerts
musicKasabian and Noel Fielding attack 'boring' musicians
videoWatch Lynda Bellingham's tragic final Loose Women appearance
A view of today's Spanish papers
Arts and Entertainment
The last great picture - Winner 'Black and White' and overall 'Wildlife Photographer of the Year'

Arts and Entertainment
High notes, flat performance: Jake Bugg

Review: Despite an uphill climb to see Jake Bugg in action, his performance is notably flat

The Putin automaton will go on sale next month in Germany
videoMusical Putin toy showing him annexing Crimea could sell for millions

Powerful images of strays taken moments before being put down

Arts and Entertainment
S Club 7 pose for Children in Need 2001
Arts and Entertainment
'Right Here' singer Jess Glynne is nominated for Best Newcomer at the MOBO Awards 2014
musicExclusive: Jess Glynne hits out at 'ridiculous' criticism of white artists nominated for Mobo Awards
'Irritatingly Disneyfied': fashion vlogger Zoella

Arts and Entertainment
Russell Brand has written a book of political analysis called Revolution

Review: Witty banalities aside, the comedian has an authentic voice

Arts and Entertainment
Separated at birth? Frank Sivero (left) claims The Simpsons based Mafia character Louie on his Goodfellas character
arts + entsFrank Sivero sues Simpsons studio over allegedly basing mobster character on Frank Carbone
Carl Bernstein (left) and Bob Woodward (right) with former 'Washington Post' executive editor Ben Bradlee

The Washington Post editor helped Bob Woodward and Carl Bernstein bring down President Nixon

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

    Trainee Recruitment Consultant Birmingham

    £18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

    Trainee Recruitment Consultants

    £20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

    Helpdesk Analyst

    £23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

    Day In a Page

    Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

    A new American serial killer?

    Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
    Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

    Sting to trap paedophiles may not carry weight in UK courts

    Computer image of ‘Sweetie’ represented entrapment, experts say
    Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

    Return to Fukushima – a land they will never call home again

    Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
    Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

    Wildlife Photographer of the Year

    Intimate image of resting lions claims top prize
    Online petitions: Sign here to change the world

    Want to change the world? Just sign here

    The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
    Ed Sheeran hits back after being labelled too boring to headline festivals

    'You need me, I don’t need you'

    Ed Sheeran hits back after being labelled too boring to headline festivals
    How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

    How to Get Away with Murder

    Shonda Rhimes reinvents the legal drama
    A cup of tea is every worker's right

    Hard to swallow

    Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
    Which animals are nearly extinct?

    Which animals are nearly extinct?

    Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
    12 best children's shoes

    Perfect for leaf-kicking: 12 best children's shoes

    Find footwear perfect to keep kids' feet protected this autumn
    Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

    Arsenal’s ray of light ready to shine again

    Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
    Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

    Moyes’ show of sensitivity thrown back in his face... by Ferguson

    Manchester United legend tramples on successor who resisted criticising his inheritance
    Two super-sized ships have cruised into British waters, but how big can these behemoths get?

    Super-sized ships: How big can they get?

    Two of the largest vessels in the world cruised into UK waters last week
    British doctors on brink of 'cure' for paralysis with spinal cord treatment

    British doctors on brink of cure for paralysis

    Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
    Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

    Lonely Planet’s Best in Travel 2015

    UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London