The widening of the North-South divide seemed set to be the key story of the housing market in 2011. But the narrative is changing, as money from local buyers and overseas investors is ever more irresistibly drawn to London — to the exclusion of anywhere else.
As a result, some commentators are now revising their forecasts not only for most expensive homes in the centre of the capital, but also for the suburbs. They also note that London’s exuberance might ordinarily have been expected to spread to other regions. But, for the moment, there is scant sign of such a ripple effect.
Even those Londoners with ample equity in their homes — and in apparently secure employment — are not confident enough in the prospects for the economy to start chasing holiday homes in the upscale resorts of Devon, Dorset and Cornwall, such as South Hams and St Mawes. There is also a discernible reluctance to relocate to such rural or seaside areas. The estate agency Savills says that in these popular hideaways values are on average 24 per cent below their peak of 2007.
Yolande Barnes, of Savills, questions how long the disparity between the metropolis and such places can continue. She says: “Sooner or later a tipping point will be reached as buyers respond to the regions that are looking increasingly good value compared with London.” But she argues that “realistic pricing” will be needed to spark this reassessment. The prospects for recovery in other locations seem much more remote, however.
The latest statistics, including the Land Registry survey, highlight the growing gulf between the performance of London and the rest of the country. The Land Registry reports that prices in the capital rose by 2.9 per cent over the 12 months to the end of May, with some boroughs, such as Islington, posting increases of as much as 8.5 per cent. Hackney — up 3.5 per cent since May 2010 — led the field in May 2011, advancing by 2 per cent during the month.
Advertisement
This is in contrast with the North East, where prices declined by 6.9 per cent, the result of falls of 16.9 per cent in Hartlepool and 10 per cent in Sunderland. The difference between the fortunes of London and other locations becomes even more marked if you focus on the progress of prime Central London districts such as Chelsea, Kensington, Mayfair and Notting Hill. Prices in these areas have climbed by 6.3 per cent in the first six months of this year.
As a result, Savills, which had forecast that this sector of the market would decline by 1 per cent this year, is now estimating growth at 8 per cent. Prime suburbs such as Chiswick, Fulham, Wandsworth and Wimbledon are forecast to end the year 6 per cent higher.
Figures from Hometrack, the housing data group, also underline the continuing strong demand for London property. The average home in the capital takes six weeks to sell against an average of 14 weeks in Wales, where values are continuing to shrink, down 3.5 per cent in May alone.
Prices in Blaenau Gwent, the authority that takes in post-industrial, high-unemployment towns such as Ebbw Vale, have slumped by 14.3 per cent over the year. Lucian Cook, from Savills, says: “These locations are suffering from a combination of low transaction levels and large numbers of repossessions. This suggests an inherent weakness that will make it very difficult for prices to recover, especially given these towns’ exposure to problems in the economy.”