London Property Rates Prop Up the UK Average

The prices of a typical home in the UK rose by almost 1.7 per cent in the last one year, which means that the average property here now costs 233,000 pounds. However, the monthly home price index of the Office National Statistics suggests that this is majorly because of the Southeast and London driving up the prices.

After the London and Southeasthave been stripped out, the prices rose only by 0.8 per cent. However, when one looks below the surface, the regional picture clearly shows that the key driver of the UK housing market is London.

The house prices continue to rise further both in London and in theSoutheast. As compared to September 2012, house prices rose by about 5.2 per cent as well as 0.7 per cent in both the regions respectively. This had followed an earlier increase of 6.3 and 2.3 per cent for the year 2012 up to August.

The economist of the Centre for Economics and Business Research, Daniel Solomon, believes that the house prices in London are generally supported by three factors. He further added that the Asian and the Middle Eastern investors are interested in investing in London, because of Arab Spring and the Euro-zone crisis. Not only this, in relation to the other UK regions, the wage growth is robust here in London as well as in south east, which supports the housing market.

The economies of the regions are comparatively independent of the public sector, which clearly means that the spending cuts as well as employment reductions of the public sector would exert relatively modest downward pressure on the house prices.

Daniel Solomon also cited that the morning inflation figures from the Office for National Statistics clearly show that price of loans have risen significantly from last year as a result of the tough wholesale lending circumstances. The cost of the mortgage payments has shown a marked increase in October, increasing by almost 6.6 per cent as compared to a 3 per cent yearly increase in September.

He further said that in London, the maximum amount of hot money that is propping up the price of the houses as arrived already and the price growth in the capital is expected to cool by next year. The restricted supply as well as the robust economic growth would continue to rise and this consistent rise in the prices along with the higher mortgage costs would mean that home affordability would be a sore point for many people in London. The expected rates of the home ownership would fall as many households move into private rented sector.

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