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Research article

Chestertons Monthly Property Markets Review August 2014


Average rental values in London increased by 9.4% in the year to July.

David Ramsdale, Research Analyst

Report Highlights

  • The summer slowdown coupled with more cautious buyers culminated in house prices seeing no growth from May.
  • The average mortgage advanced to first time buyers totalled £122,000 in Q2.
  • Since the introduction of the Tenancy Deposit Scheme in 2007 the average cost of a deposit has risen by 34%.
  • Nine of the 33 London boroughs saw house prices increase by more than a fifth in the year to June.

During July house prices picked up 1.2% from June according to the Halifax house price index and by 10.2% over the last year to an average of £186,322. The Nationwide house price index provides a different view on the market as house prices improved negligibly in July, up 0.1% as the market experienced a seasonal slowdown and a possible cooling off period in London and
parts of the South East. Over the last 12 months the index recorded a 10.6% annual uplift to an average of £188,949.

The Halifax Housing Market Confidence Tracker for the second quarter of this year indicates the housing market in England and Wales is altering from a buyers’ market to a sellers’ market. Sentiment toward selling property increased by one point on a quarterly measure to +25 and by 13 points from the same time last year. Conversely, sentiment towards buying property dropped 29 points from the first three months of this year to a reading of +5. In regards to house price performance over the next 12 months confidence is highest in the South East at +80, followed by +74 in London. However, confidence in the capital is one point lower than Q1 and five points below the reading a year ago. Confidence in house price growth is lowest in Wales having halved
over the last 12 months to just +32.

Average rental values in London increased by 9.4% in the year to July to £1,429 per month according to the latest Homelet rental index. At a sub-district level rental values increased most rapidly in South West London, up 14.2% in the year to July to an average of £1,743 pcm. Elsewhere rental values in North West London (11.3%), West London (11.1%) and Dartford (10.2%) all saw double digit annual growth. Rental values increased across all parts of London with the weakest growth occurring in Enfield where the average monthly rent edged up just 1.2% in the 12 months to July, only slightly bettered by Romford (1.8%) and Harrow (2.4%). The most expensive part of the capital to rent remains West London where the average monthly rent is
currently £1,803.

Annual capital growth on office property remains on an upward curve in July and reached 17.27%, outperforming both retail and industrial property. As a result of this further increase annual capital growth is now just 3.32 percentage points higher than the previous peak in 2010. Annual total returns also improved once again in July to reach 23.23%, a sizeable increase from the 6.70% recorded a year earlier. Rental growth is also on the increase, albeit at a slower pace than capital growth, and averaged 5.96% to stand just 2.61 percentage points below the previous market peak.