17 September 2011, Estates Gazette
It used to be that when London did well, the rest of the country did well a year later. Not any more
Graham Norwood reports on the UK’s “Two Markets”
Like rolls of a camera film and coin-operated phone boxes in the street, the housing market has its share of nostalgic but outdated concepts. one of them it seems, is the old “ripple effect”, when market fortunes in London gradually extend to the rest of the country. Experts say that might be a thing of the past. Instead, there is near-consensus that what drives London’s market today- especially in prime Central areas- is for the first time quite unlike the factors which affect other areas.
Figures in all price sectors support the argument that London now operates separately from the rest of the UK. Look, for example, at the Nationwide’s house price data for the second quarter of 2011, compiled by lending data to buyers predominately at the mid-range and bottom end of the market. Average values were down year-on-year in all regions except London. The average price in London was 0.2% up in the quarter while across the rest of UK there was a 1.2% drop.
“The change from previous cycles is the perception of real estate in London’s most sought after postcodes as a unique and safe asset- one which offers a degree of protection from the vagaries of the global economy and geopolitical risk. In addition London has very tight planning restrictions which keeps supply tight. Supply and demand dynamics are widely different in London compared with the rest of the UK, with London constantly seeing demand outstripping supply. The rest of the UK is much more of a domestic buyers’ market and therefore much more susceptible to a weak economy and a weak mortgage market” explains Camilla Dell of buying agency Black Brick.