New figures suggest that one out of every five homes in the UK’s capital city of London is worth at least £1m, writes property developer Richard Carr.
Expensive housing market
London is the UK’s most populous and crowded city. People from around the world flock to London because it is the heart of the UK’s economy, as well as a premier global financial and technology hub. There is an increasingly strong demand for a dwindling supply of living spaces in London, meaning that its average house prices have experienced extraordinary growth in the past few years.
The latest index from the Office for National Statistics (ONS) reports that the average London house price grew by 14.5% in the year to April 2016. The ONS has implemented a new formula to determine its average UK residential property values, so the average London house price is actually lower for April (£470,000) than it was in March under the old system (£552,000). Despite this change, average London residential real estate values continue to hover around the half million mark.
Million pound homes
But new research from estate agent eMoov indicates that at the top end of the market, 20% of all London homes are now listed at a minimum of £1m. Industry portal Property Wire writes that this makes London one of the most expensive cities on earth for residential real estate. eMoov broke these figures down by borough, to show the distribution of £1m homes across London.
Westminster was the borough with the highest number of £1m homes, at 63%. South Kensington and Chelsea followed at 62% respectively, with Camden ranking next at 43%. Meanwhile the boroughs of Barking and Dangenham had no £1m residential properties. But eMoov chief executive officer Russell Quirk suggested that with London house prices rising so rapidly, this may not be the case for long.
Rapidly rising sector
Explaining, Quirk said: “When people think of London they accept prices are through the roof. Even though the average house price in Barking and Dagenham is considerably lower than the London average at £253,000, it still trumps the UK average by tens of thousands of pounds… In a market as inflated as London where stock is scarce and demand is overwhelming, it’s quite remarkable that there is still an entire borough without even one property at the £1 million mark or over.”
Expanding, Quirk commented: “With prices across London continuing to rise, surely it won’t be long before Barking and Dagenham will see some of its properties priced at £1 million or above. Despite this, our latest research shines yet another spotlight on how unaffordable London is from a property point of view. When you consider that across a city as vast and as populated as London, one in every five properties will cost you a six digit price tag, it really is disheartening for the aspiring London home owner.”
Recalibrating investment strategies
eMoov’s research suggests that London’s residential property market is overheating. This raises questions for investors who have focused their investment strategy heavily on the UK capital. In such an expensive market is it still possible to generate strong return on investment, or should investors move north, which is fast becoming a hotbed for property investment? Going forward, investors may have to determine whether the high demand for living space in London can offset the considerable cost of investing in the city’s residential property, in order to generate healthy returns.