London prices rise again in two-tier property market
House prices in London are continuing their upwards trajectory, while Scotland and Northern Ireland are seeing declines, figures from the Office for National Statistics have shown.
In the 12 months to June, UK house prices increased by 2.3 per cent, roughly unchanged from the 12 months to May.
However, the year-on-year increase reflected 2.8 per cent growth in England, which was offset by declines in Scotland and Northern Ireland of 1 per cent and 11.9 per cent respectively. House prices in Wales remained unchanged.
In England, prices were driven by a 6.5 per cent year-on-year rise in London, and increases in the South West and South East of 2.3 and 2.2 per cent respectively. The only decrease in England was in the North East, where prices fell 1.3 per cent.
Prices of new homes rose by 5.9 per cent during the 12 months to June 2012, while the price of pre-owned dwellings increased by 2.1 per cent in the same period.
First-time buyers paid an average 3.1 per cent more in June 2012 than in June 2011. Existing owners saw a price increase of 2.1 per cent over the same period.
Ashley Alexander, director for estate agent review website MeetMyAgent.co.uk, said the UK has a two-tier property market of London and the rest of the country.
Property prices in the capital are kept high by demand from foreign buyers, which has resulted in house price rises almost three times that of the average growth across the whole of the UK over the past year.
Mr Alexander said: “To get a true picture of the state of the UK property market, it almost makes more sense to ignore the London market entirely, as sales in the capital are creating a ballast to house prices.
“Based on these figures, house prices appear to be reasonably stable, but there are still underlying concerns that can’t be ignored. Economic instability, high unemployment and strict mortgage lending criteria continue to be a barrier to sustained price growth, and consumer confidence remains fragile.”
However, the government’s funding for lending scheme is starting to boost the mortgage market as lenders are beginning to offer cheaper products.
Mr Alexander said this should inject some “much needed activity into the property market”, particularly among first-time buyers who are struggling to raise large enough deposits.
Meanwhile, the latest national mortgage index from national mortgage broker Mortgage Advice Bureau showed activity bounced back strongly in July, with borrowers defying weak economic data and taking advantage of cheaper, more competitive products on the back of the funding for lending scheme.
Using data from more than 500 brokers and 800 estate agents, the index found application activity for both purchase and remortgage activity rose 14.6 per cent between June and July.
The average loan-to-value on purchase applications rose to 70.4 per cent in July from 68.2 per cent in June, halting six straight months of falls.