London has been one of the most expensive cities in the word to live in for several decades, and the trend is showing little sign of ending any time soon. According to an October 14th article in the Financial Times, the UK’s Office for National Statistics reported earlier this week that London housing prices were up 19.6% year-over-year as of August. The numbers for both July and August represent the biggest one-month price increases since 2007.
Statement from ONS head
In a statement, Chris Jenkins, the head of housing market indices at the ONS, said the major year-over-year increase in London housing prices was partly because of a slower rate of growth in August 2013. “But that still takes nothing away from the fact that prices in London are rocketing,” he continued.
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Regional breakdown of UK housing market
According to the ONS, the UK’s national housing price growth was 11.7% in the 12 months to August. The average property price climbed to £274,000.
Southeast England was one area that saw above-average growth of 12.3% The eastern part of England recorded a 11.6% increase.
Housing price growth outside London and the southeast was 7.8% overall.
Prices in Northern Ireland were also up 9.6%, the highest figure since December 2007. Of note, prices in Northern Ireland are still about 40% their 2007 peak.
First signs of cool down in London housing market?
The upbeat ONS figures stand in contrast to some recent forward-looking data, which suggests that London’s housing market is beginning to cool down.
Last week’s survey from the Royal Institution of Chartered Surveyors highlighted that real estate agents in London reported the first decrease in residential housing prices in over three years.
Of note, the ONS figures record completed property transactions, while the RICS survey is a sentiment indicator: a sample of chartered surveyors are asked whether prices are rising or falling in their markets.
Hometrack has been undertaking a similar survey running for a decade; that survey recorded its first drop ever in London prices, but just 0.1%.
Real estate analysts and brokers who argue the market is cooling say its at least partly because of the lending reforms brought about under the new mortgage market review. Now residential real estate borrowers must provide more details about their income and expenses, as their ability to repay the loan under higher interest rates is also being examined.