This infernal Help to Buy Scheme will only widen the North/South divide

London has been a housing market of its own for years, a kind of “Planet Billionaire”

Housing in south London (Getty Images)

A week is a long time in house price analysis.

The controversial extension of the controversial Help to Buy scheme is still in its infancy, but it is beyond contention that its major contribution to the gaiety of the nation will be to enhance our much-loved North/South divide.

Thanks to the invaluable help of the Office of National Statistics (ONS), we now know that the year-on-year increase in house prices climbed to a 34-month high of 3.8 per cent in August from 3.3 per cent in July and 2.6% per cent are completed, so Help to Buy two have not yet made its mark, so watch this space.

But within the national figures lurks a dark if hardly secret fact.

If London is excluded from the stats, the annual figure plummets to 2.2 per cent. More strikingly, excluding London again, house prices overall were, in August, still 4 per cent below their January 2008. So our old friend the North/South divide strikes again.

Dr Howard Archer, Chief UK Economist at IHS Global Insight, is very clear about what this means. “Modest house price rises have some benefits, especially when they are occurring in areas where house prices are still substantially below their peak 2007 levels and a significant number of people are facing negative equity.

“However, it is vitally important for economic stability and longer-term growth prospects that a new housing price bubble does not emerge”.

But it has, of course, already emerged in the over-heated, foreign-cash-fuelled capital. So all of last week’s chatter as to whether there is or is not a house price bubble is beside the point, the point being not IF, but WHERE.

London has been a housing market of its own for many years, a kind of “Planet Billionaire”, but the credit crunch took some of the edge off it.

Now, with economic austerity still affecting the natives, buyers for newly-built property across the city – not just Kensington but Battersea and even the Elephant & Castle – are being actively sought in Malaysia, Singapore and Hong Kong and at prices which Londoners simply cannot afford. This has pushed the average London price to over £500,000, with new studios starting at £330,000, nearly three times the national average. And Mayor Boris Johnson seems to think this is just fine and dandy.

Dr Archer warns that “It is therefore of vital importance that policymakers closely monitor the situation and are prepared to act quickly and decisively if signs of a housing market bubble start to mount”. Sound advice, but given the PM’s, Chancellor’s and Mayor’s reactions so far, fat chance.