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London Market Drives House Price Growth |
| Thursday, 1st February 2007 |
House prices rose by 0.4 per cent in Jan, but the growth is driven by strong London market |
The supply and demand imbalance in the London property market has bolstered house prices by a nationwide average of 0.4 per cent over the course of January, says Hometrack's latest monthly housing survey.
The year-on-year rate of growth is now six per cent, the highest rate since 2003, with the national average house price totalling £170,800.
Leading the way with a 0.8 per cent monthly price change, the London market is currently something of an anomaly in a climate where 72 per cent of the country has house prices are more muted.
In the East Midlands prices were static, and even the traditionally strong South East region underperformed with 0.3 per cent monthly price growth (see table below).
Rising values in the Capital can be attributed to the continuing high demand for property outstripping supply, particularly in sought-after central and western London.
The above-average price rises in London also extended to areas such as Buckinghamshire and Essex, which are desirable due to their commutable distance to the City.
While the time taken to sell a property has fallen from a national average of 8.1 weeks to 6.7 weeks over the last 12 months, Londoners appear to be snapping up everything in sight, with an average of just 3.3 weeks to sell.
In conjunction with this, the region achieves an average 96.2 per cent of its asking price, compared to the national average of 95.1 per cent.
Low levels of supply, says the report, are explained by "the high cost of servicing mortgage debt in a low inflation environment."
While Hometrack acknowledges that the latest interest rate rise has not yet had time to make a significant impression on the market, the fact that supply is outweighed by demand in the London market signals a continuing rise in house prices for 2007.
Richard Donnell, Hometrack's Director of Research, does not see any obvious indicators that could rejuvenate the supply of homes for sale in the near future.
He notes: "Controlling house price inflation at the moment is all about managing demand and interest rates are a blunt tool that are as much about impacting on market sentiment as affordability levels.
"The Bank of England will hope that the early move on interest rates will make households think twice about entering the market."
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