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London booms despite UK market slowdown

11th December 2006 | back to article listings BACK    print this article PRINT

Phenomenal London housing growth has seen significant rising property prices in December despite an overall downturn in the market. The latest property price index from Rightmove has shown an unprecedented expansion in the capital's housing market with asking prices rising by 23.6 per cent in the last year alone.

These positive figures run against the overall pattern unearthed by the Rightmove survey of falls in property prices in seven out of the ten UK regions.

The survey suggests that fat cat salaries and bonuses are driving the growth in the London property market with Miles Shipside – Rightmove's commercial director – saying the city was "particularly active" in this regard.

He said: "It is traditional for sellers who come onto the market to trim their prices to attract buyers who are distracted by Christmas. Although that's what is happening nationally, the London market remains buoyant."

Although the capital's house price growth has been lively, there is a belief that 2007 will see an inevitable cooling in the London market as affordability constraints will restrict the current high demand.

In light of the stagnated house prices nationwide many consumers may be considering buying a property this festive season, however, this would be a mistake according to a spokesman for the Council of Mortgage Lenders (CML). Bernard Clarke, CML representative, said people should be careful before lunging into an impulse buy this festive season.

He addressed the market slowdown this Christmas season by saying it was a normal pattern and that prices usually picked up come the new year.

Mr Clarke responded to a question over whether consumers should take advantage of this seasonal housing pattern. He said: "We wouldn't go that far. People need to think carefully about venturing into home ownership. They need to make sure that this fits their needs and that the commitments they take on are affordable and sustainable in the long term."

Separately, the CML today commented on its house price growth predictions for 2007. Mr Clarke said the CML expected market movement to be broadly in line with the Rightmove prediction of six per cent.

He argued: "We are in the process of revising our forecasts at the moment. Six per cent is broadly in line with what we ourselves are expecting."

Asked whether Rightmove's figures were symptomatic of a market slowdown, he said it was simply too early to say.

He concluded: "I think it is probably difficult to read too much into this month's figures but we expect there to be a slowing over a longer period of time in the growth of house prices.

"As I say, I think it is difficult to read too much into one month's figures, or to come up with an explanation for one month's figures. Clearly there are seasonal influences on the market but we try to look at what we think is going to happen over the longer term."

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