Average London House Prices Hit a New All-Time High in May
The buoyancy of the London property market continued to impress throughout May, with average house prices once again hitting a new record high. Even as the UK’s escalating living-cost crisis was hitting households hard, the average price of a home in London hit an astonishing £526,183 – more than 8% up on the previous year.
Detached homes in London saw the biggest annual price growth of all – up just over 11% to reach £1,082,09, compared to £973,866 in May 2021.
However, monthly house price growth in London has slowed significantly, with average property prices for May coming out just 0.2% higher than those of April.
Barking and Dagenham and Barnet recorded the highest annual property price growth by district – both up by 11.4%.
“With the Bank of England putting up interest rates more than once this year, many house hunters have also established a stronger sense of urgency to buy before further rate hikes,” commented Richard Davies, managing director of London agents Chestertons.
“Our branches receive enquiries from families, couples and investors but, particularly post-pandemic, we are seeing an uplift in the number of international students, international buyers as well as office workers who require a pied-à-terre closer to work.”
Elsewhere, Jeremy Leaf, a North London estate agent, said that much of the market’s explosive performance could be credited to the temporary availability of ultra-low mortgage rates.
“As we are finding at the sharp end, prices are continuing their upward path, despite the impact of 40-year high inflation and five successive interest rate rises,” he said.
“However, the continuing lack of choice, combined with a desire to take advantage of mortgage offers at super-low rates before they expire, have given the market added impetus.”
London Lagging Behind the Rest of the UK
Even with such explosive annual growth, London continues to lag behind the rest of the country. According to the latest Land Registry figures, average UK property prices for May were up a huge 12.8% compared to the same time last year.
The South West recorded the highest annual house price growth of all, coming out at 16.9% over the course of 12 months.
“As we move into summer months, it is likely this growth will continue as housing purchases naturally increase at this time of year, inevitably pushing prices up further,” said Stuart Law, CEO of the Assetz Group.
His sentiments were echoed by Yopa Chief Analyst Mike Scott, who believes there is no immediate slowdown on the horizon.
“There is as yet little sign in the figures of the widely expected slowdown in response to increases in interest rates and the cost of living, with the housing market proving to be surprisingly resilient,” he said.
Priced Out of Contention
While homeowners across the UK continue to reap the windfall of skyrocketing property prices, millions are finding themselves priced out of the market entirely. Particularly in London, home to the highest average property prices in the UK, it is becoming practically impossible for low and average-income households to relocate to the capital.
New figures released by the Office for National Statistics (ONS) suggest that the average price of a property sold in England (in the year to the end of March) was approximately £275,000. As the average annual disposable household income in England is just £31,800, the average home costs 8.7 times this amount.
Affordability ratios are particularly disproportionate in London, where an average-priced home now costs the equivalent of around 40 years of income for a low-income household.
“The government has a great deal to answer for when it comes to the plight of today’s homebuyer and the blame can’t be solely placed at the door of one mop headed buffoon,” said James Forrester, managing director of Barrows and Forrester,.
“For years, they’ve insisted on fuelling buyer demand while failing to address the severe reality of the housing crisis by actually building more homes and this has pushed house prices to record highs.”
“As a result, the initial cost of a mortgage deposit has also spiralled and now acts as a huge financial barrier, preventing many from realising their dream of homeownership.”