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Is London on the verge of another property boom?

Monday 11th February 2013

Historically in Britain, residential property prices demonstrate a distinct spatial pattern over time, rising initially in a cyclical upswing in prime central London, then wider London and the south east, before spreading out over the rest of the country. This is known as the ripple effect.

A glance at the market in prime central London suggests that a mini boom is occurring, on the back of rising demand from homebuyers, which could eventually benefit homeowners, particularly investors in London and eventually in other parts of the UK.

Ed Mead, of Douglas & Gordon, said: “January reaffirms our hunch that 2013 will be a good year for sellers as stock levels are 10% down compared to this time last year and we received 50% more offers from what felt like more motivated buyers.

“The actual number of buyers registering is consistently high, and the fact that they are looking in multiple locations shows that many are willing to expand their search at a time when stock is increasingly scarce.”

WA Ellis has reported its busiest January for sales since 2009, fuelled mainly by rising interest from overseas buyers, while housing supply continues to struggle to keep pace with growing demand.

The Mayor of London Boris Johnson’s call last week for central government to allow London to retain stamp duty on all property sales in the capital in a bid to help finance the construction of “desperately” needed new homes in the city, reflects the growing supply-demand imbalance in the capital.  

Mayor Johnson argues that the estimated £1.3bn a year received in stamp duty on all homes in London would go a long way towards helping it finance the construction of new homes, including affordable properties, in the capital.

Johnson estimates that in excess of one million new homes need to be developed in London over the next 25 years to meet growing demand for housing in the capital.

In a keynote speech to the Chartered Institute of Housing, last week, the Mayor of London said: “Since I was elected, London's population has grown by 600,000 and is forecast to rise by a further million at least over the next 25 years. If we do not come up with a new plan to build the homes we need, this great city will suffer and the whole country will feel the consequences.

“What is needed now is a radically different approach which optimises City Hall's role, unlocks the potential of the capital's boroughs, allows developers including housing associations to up their game and creates a stable supply of land for housing. Above all, London needs a stable funding stream which will support and accelerate its housing and infrastructure delivery.

“Even in the toughest of economic times London has shown that with fresh thinking it can deliver, with record affordable house building figures in my first Mayoral term. So I am calling on the coalition to give us the tools and we will solve the crisis, supporting and creating hundreds of thousands of jobs and boosting economic growth across the UK along the way.”

The housing shortage is likely to result in further property price growth in the capita, especially if mortgage lending conditions continue to improve.

              

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