Homes 'earn' Londoners more than their jobs as house prices soar
01-16-2014
Bubble fears: Londoners make more from their homes than the average salary
Jonathan Prynn, Consumer Business Editor
London’s homeowners “earned” almost £50,000 from the value of their property last year as prices surged by 11.6 per cent.
The average home was valued at £441,000 in November, up from £393,000 a year previously, according to the latest official figures.
With the average London salary standing at £37,000 it means many homeowners are making more from their homes than their jobs. Prices in the capital are 18.1 per cent higher than the pre-recession peak in January 2008.
But the rise — driven by a chronic shortage of new homes, growing confidence in the recovery and insatiable global demand for London property — will renew fears that the capital is in the grip of a dangerous housing bubble.
A better than expected bonus round for many bankers in the City, following a year that saw the return of mega deals, is also thought to have helped push prices up.
Adrian Anderson, director of mortgage broker Anderson Harris, said the rise in prices in London is “double the UK average growth rate and it continues to be the real driver of house prices”.
He added: “This is down to its international status, with overseas money coming into London, attracted by a relatively weak sterling but also because London is considered a safe haven with a steady political system at its core.
“But London is not just about oligarchs parking several million in cash here, it is also about families wanting their offspring to attend schools in London. The banking sector has also picked up and is providing a fillip to the market.”
The figures from the Office for National Statistics came as a survey revealed that 98 per cent of Londoners believe the value of their house or flat will go up this year. Only one per cent said it would fall, according to property website Zoopla.
On average, Londoners predicted price rises of 9.6 per cent by the summer. Prices in many neighbourhoods are being driven by turmoil around the world that drives investment into the “safe haven” of the capital’s property market, according to new research.
The study from Oxford University’s Said Business School found the wealthy Middle East resident favoured expensive properties in Little Venice while unrest in Pakistan pushed up prices in Wimbledon Park as well as Southall. London agents said Egyptian and Israeli buyers were particularly active in London.
But there were warnings that the rises reflect London’s intensifying housing crisis as much as its attraction to foreigners.
Doug Shephard, director of Home.co.uk, said: “Until vendors return to the market in considerable volumes — and this may only happen when the seemingly inevitable bust recurs —prices will continue to be supported and home hunters will become increasingly frustrated.”
Nationally prices rose by 5.4 per cent but if the impact of the London and the South East “bubble” is striped out they were only 3.1 per cent higher.