Growing Disparity between London Property Market and Rest of UK
London’s residential property has traditionally fetched higher prices than houses elsewhere in the UK but the financial crisis has triggered a marked polarisation of the market, with home values falling in every region of the country other than the capital and its near environs. Underlining the extent of Britain’s wealth divide, real estate consultant Savills (LON:SVS) has released a new study showing a growing disparity between house prices in London and the South East and those in the rest of the country.
In its annual Valuing Britain analysis, released on 2 February 2013, Savills estimated that the total value of the UK housing stock has risen slightly to £5 trillion over the past year but that housing wealth is becoming increasingly concentrated in London and the South East. The realtor found that the capital’s property market is now worth approximately £1.12 trillion, accounting for 22.5 per cent of the total housing value in the UK. The research further revealed that the net value of properties in just ten London boroughs – Kensington & Chelsea, Westminster, Barnet, Wandsworth, Richmond, Camden, Bromley, Ealing, Lambeth and Hammersmith & Fulham – now surpasses the worth of all properties in Wales, Scotland and Northern Ireland combined.
As illustration of the growing wealth gap between the South East and the rest of Britain, Savills reported that Elmbridge in Surrey has a housing stock of £31 billion -- £2 billion more than the whole of Glasgow. The average house price in Elmbridge is £660,000, while in Glasgow, with a population almost ten times greater, the average is just £132,000.
Rising Value of London Residential
While overall property values have fallen in every other region of the UK during the recession, London house prices have either increased or remained steady. According to the Savills study, the value of the capital’s housing inventory has risen by £140 billion over the past five years. Residential real estate in London is now worth 14.2 per cent more than it was at the height of the pre-credit crunch boom. This price gain alone exceeds the total value of all homes across all of the North East of England, where the total housing stock is worth just £128 billion, down 19.3 per cent from its peak.
Savills said that the increase in value of London’s property reflects the growing interest from overseas investors who have in recent times increased their rate of buying in the capital’s most sought-after areas, notably Mayfair and Knightsbridge. Meanwhile, according to Savills, other parts of London have benefited from the sheer level of liquidity in the residential property market, which has seen increasing amounts of cash chasing the same number of desirable properties, resulting in ever-rising prices.
According to Lucian Cook, director of residential research at Savills, the divergence in values is “dramatic” and will have “long-term impacts on mobility of labour as well as the pace and distribution of economic recovery”. He said: “More housing wealth is being concentrated in fewer people’s hands. That restricts the ability of some groups – particularly younger generations – to get on to, or trade up, the housing ladder, creating longer-term implications on the lifetime cost of housing.”