Price gap between London and the rest of the country closes dramatically
The gap between property prices in England and Wales and London has closed significantly according to a new data set released by Land Registry in conjunction with the Office of National Statistics (ONS). Analysed by London Central Portfolio, this indicates that the average price of property in England and Wales reached £221,832 in May, now standing at almost half the price of Greater London (£472,163). This compares to previously released Land Registry data from March when property in London was three times more expensive than the rest of the country.
These latest statistics demonstrate that prices in England and Wales have begun to feel the benefits of record low mortgage rates and recent government stimuli initiatives such as the 2014 reduction in stamp duty and the much trumpeted Help to Buy scheme. Price growth in May reflected a healthy 1% increase versus the previous month whilst prices were up 8.7% year-on-year, well above the average market appreciation seen since the credit crunch of just 4.9% per annum.
Despite the new Land Registry data suggesting that prices in England and Wales are quickly catching up, the picture in London also remains very strong. In May, prices were up 1.5% versus the previous month and 13.6% year-on-year.
Naomi Heaton, CEO of LCP, said:
“This new data is certainly encouraging news for the domestic property market as a whole, where average prices are under £500,000. Despite the uncertainty pre-EU referendum and a widely anticipated pull back post 1 April, following the introduction of the new 3% additional stamp duty levy, all areas appear to reflect high levels of appetite.
“One word of caution, however that this does not factor in any change in sentiment since Brexit. Weakening economic indices and potentially more stringent mortgage criteria imposed by banks may create a downward pressure on the domestic market.
“On the other hand, we predict the rest of the year will continue to demonstrate positive uplifts for the PCL property market, under £1m, underpinned by the weak pound and continuing low interest rates. Since last month’s announcement, LCP has received five times more enquiries to subscribe to its Central London residential fund on a pro-rata basis than in the two months preceding the vote. Vendors are also hiking up their prices. In January, one bedroom flats which were being marketed at an average of £675k, are now being marketed at £750k, an 11% increase. In contrast, the high value end of the market is still suffering from the impact of heavy tax increases and political uncertainty.”
Naomi also warns that the government have been doing some suspect number tinkering with the highly regarded Land Registry Index. In June, their brand new index incorporating data from the ONS was launched. This replaced the Land Registry’s old HPI data, which has been used as a reliable barometer for property market trends for the last 20 years.
“Whilst still in ‘testing’ stage, the new statistics bear very little resemblance to the old data. When the new data set was launched, average prices jumped up 15% in England and Wales and the government appear to re-writing history. Price growth now reflects a substantial 41% increase since the credit crunch low point, compared with just 26% in the old index.
“Our question to the government now is whether their property records have actually been under-stating average property prices by up to 15% in England and Wales for the last two decades?”
London was also not immune to some statistical meddling, with prices being cut by 14% in the new data set. As a result of the updates, London looks significantly more affordable to the domestic population with average prices now running at well under £500k.
“This is frighteningly reminiscent of the time when the ONS took over a data set initially produced by the Council of Mortgage Lenders (CML). Recorded prices changed so dramatically that the impact of the 1989 recession was entirely eliminated!”