The Sunday Times: The 500,000 question
Sun 24 Mar 2013
As average asking prices in the capital hit half a million, how high can the market go?
Across the capital, would-be home-buyers are raiding their bank accounts, cancelling the organic veg delivery and grudgingly ditching their Barbados holiday for the Belearics. The reason? Average asking prices are set to hit a staggering 500,000 by the end of the month, according to new figures from the property website Rightmove.
Typical asking prices in London reached a record 496, 298 at the beginning of March, 1.9% up on February's figure and 9% ahead of the same time last year. Kensington and Chelsea saw the biggest increase, 6.2% - and, unsurprisingly, the highest average asking price, just over 2.3m. But who would have predicted that the borough of Lambeth, south of the river, would occupy second place? You'd be paying 6% more for a property there than you would have a month ago, at 502,200.
"It's going on and on," says Miles Shipside, director of Rightmove. "London prices are quite incredible." He attributes the soaring cost of buying in the capital to a number of factors. "At the top end, you've got safe-haven foreign investors. For them, the value of protecting money from things like the eurozone crisis is almost greater than picking up a property at the right price, because they're putting the money beyond risk."
Then there is London's relatively strong economy: earning power in the City remains substantial, and bonuses are still around and being used to buy houses. Throw in increasing demand, and a genuine shortage of properties coming to the market, and it's not surprising things look buoyant.
The average figure masks some substantial differences, however. While a property in Chelsea or its increasingly smart neighbour, Fulham, could easily set you back well in excess of 1m, head to the borough of Bexley, in the south-east, and you'd be looking at a more modest 225,000. "The London market is pretty diverse," says Lucian Cook, head of residential research at Savills estate agency. "At one end of the scale, you've got Islington, where transaction levels are 90% of what they were pre-crunch, and at the other end places like Barking and Dagenham, where prices are still 19% below pre-recession figures."
In smart areas such as Kensington and Chelsea, rocketing asking prices could also be put down to panicked sellers wanting to get rid of their housing stock, sending the overall average up. Under legislation coming into effect next month, anyone who owns a property worth more than 2m that is registered in an offshore company name will have to register with the taxman and pay an annual levy; they will also be subject to capital gains tax at 28%.
"A quarter of our stock over 2m is on the market right now because people don't want to pay the levy," says Ed Mead, director of Douglas & Gordon estate agency's Chelsea office. "With lots of people selling at the top end, asking prices are going to go up."
Where prices most closely reflect the realities of the market, Mead says, is in more traditional family areas. In the boroughs of Lambeth and Wandsworth, which cover Clapham, Battersea and Southfields, demand is increasingly high for decent property priced below 2m, and there is a death of stock available.
As a result, it is far more common to see sales over the asking price, and even sealed bids.
According to Robin Chatwin, head of Savills' Wandsworth, Battersea and Clapham offices, applicant levels are 70% up on this time last year and homes have been selling quickly since Christmas - one property was on the market at 500, 000 for two weeks, went to sealed bids, and has sold for more than 10% above the asking price. "People are selective, but if they see the right thing, they will pay premiums," he says.
This picture is even more marked in Fulham, where according to the Rightmove date, average asking prices have jumped from 861, 555 a year ago to just above 1m - a rise of 16.8%.
Jamie Lester, director of Haus Properties, says the agency is seeing an increasing number of sealed bids in the area, with 15 buyers or more for each home and 80% selling at or above the asking price.
Is this upward trend set to continue? While homeowners are reluctant to loosen their girp entirely on the London market, it seems prices won't go down any time soon. As Lucian Cook puts it: "We expect consistent, if not staggering, price growth over the enxt five years."