–– London house prices rose 10.6% in October, up from 9.6% in September. The half-a-million-pound barrier has now been broken – almost three times higher than the national average.
–– At borough level, annual price growth was strongest in Hillingdon (+13.1%), while in Hammersmith & Fulham prices actually fell by 0.9% in the year to October. Prices in Greenwich rose by 12.2%.
The usual seasonal slowdown towards the end of the year did not materialise and price growth continued to speed up in London. However, this strong price growth has not been universal across the capital – perhaps characteristic of 2015 as a whole. In prime locations, prices remain under severe pressure. The 3% surcharge on stamp duty for buy-to-let and second-home buyers planned for April will only exacerbate what is already a difficult market for sellers and investors in these locations.
Prime Minister’s promise to get London building
In the first days of 2016, David Cameron, the Prime Minister, announced his intention to tackle the housing shortage in London. The Government will fast-track the building of affordable homes on publicly owned land, an approach not used on this scale since the Docklands regeneration of the late 1980s. Pilot schemes will start on five sites, including Old Oak Common, an area of railway and former industrial land close to Queen’s Park and Acton, which will deliver 24,000 new homes for residentsat all stages of life, from first time buyers and young professionals to retirees. A minimum of 1,500 new homes will also be constructed at Park Royal. A new high street, schools and leisure facilities will be created as part of the development, as well as commercial and office space around a new Old Oak Common station, providing up to 55,000 new jobs, as well as space for 1,500 businesses on the Park Royal Industrial Estate.
–– National house price rises quickened again in the year to October 2015, with prices rising at 5.6%, up from 5.3% in the previous month, according to the Land Registry both the South East (+8.3%) and East of England (+8.0%) saw price growth slow over the same period.
–– Buy-to-let investors are inflating prices for first-time buyers, according to research from Rightmove. The average asking price for homes currently coming on to the market has increased by 5.6% over the past year to reach a new high of £296,549, but sellers of homes attractive to first-time buyers are now asking 9.6% more than the same time last year. Data from the Office for National Statistics also indicates prices paid by first-time buyers rose by an average of 3.8% over the year to August to a record high of £215,000.
Unintended fall-out for Generation Rent?
Despite cheaper mortgage finance, affordability remains a major stumbling block for many first-time buyers. While the Government has acknowledged more homes need to be built, and signalled at the beginning of 2016 that it will develop more publicly owned land, the scale of the housing requirement to eradicate the long-term shortfall and to cope with projected future population growth will be difficult to achieve. Increasing the tax burden at the higher end of market will not resolve affordability issues for first-time buyers either, and could risk trapping more people in “generation rent”.