House prices in London rose by 18% during the first quarter of the year compared with the same period in 2013, Nationwide said this morning - meaning prices in the capital are now 20% above above their 2007 peak. Depending on how you are doing in the Great Property Race, that’s either super or utterly demoralising. As Economist reporter Daniel Knowles put it:
If you're a banker who wants to buy a new flat in a skyscraper in Canary Wharf, London's housing market is almost working for you— Daniel Knowles (@dlknowles) April 2, 2014
MT, alas, is not a banker who wants to buy a new flat in a skyscraper in Canary Wharf. Nationwide said average prices in the capital are now £362,699, more than double the national average of £180,264.
Nationally, prices rose by 0.4% in March, compared with a rise of 0.7% during the previous month (that’s more like it) - although annual house price inflation did rise, from 9.4% in February to 9.5% in March. Sigh.
Last September, George Osborne flatly denied there is a bubble ‘at the moment’ - but with prices soaring 20%, it’s difficult to argue with that now. Even enormous property services firms like Savills aren't sure growth is going to keep going.
'We are wondering whether this level of price growth in London is sustainable,' Savills' Susan Emmett told the FT. The question is no longer whether there’s a bubble - but when, and to what extent, it’s going to burst.
Various global factors are putting pressure on prices in London, including (but not limited to) inward migration, the failure of the Arab Spring, the sudden appearance of the Chinese consumer and the collapse of the Eurozone.
For most London property owners, a drop in value of as much as 20% will be a setback, but not calamitous. But you have to question the wisdom of those taking out a 95% Help to Buy mortgage on a £300,000 one-bed in Tooting. If they’re not careful, the people finding it hardest to buy now will be those hit hardest when the bubble bursts.