House prices spiralling up

Jane Padgham12 April 2012

LONDON'S housing market is in the grip of a speculative boom, with the recent surge in property values triggering a demand-powered prices spiral.

Unveiling another jump in house prices in March, property website Hometrack said expectations of further price increases are causing a scramble for homes. That, in turn, is driving prices higher in a phenomenon not seen since the late 1980s.

Hometrack's housing economist John Wriglesworth said: 'Strong price rises so far this year have failed to subdue demand but instead have encouraged it to grow more. This has resulted in excess demand which in turn will fuel more price rises and speculative expectations. The slowdown experienced last year is now a distant memory and double-digit house price inflation for London this year is a likely prospect.'

Hometrack has lifted its fullyear-London house price inflation forecast from 6% to 10%.

A poll of more than 900 London estate agents by Hometrack found the average price of a home has risen by 1.8% over the past month, after increasing by 1.7% in February. The latest increase is the largest since January last year. In a further positive development, selling prices as a percentage of asking prices rose in March for the fourth month in a row to 96.7%.

All London's 33 boroughs enjoyed rising prices this month. Top of the league was Havering, where prices leapt by 4%. A deluge of first-time buyers has flooded the market, but investment buyers have also snapped up property in the borough. Coming a close second was Harrow, which enjoyed a 3% increase in prices thanks to a surge in demand for its relatively inexpensive properties. It was followed by the City of London and Waltham Forest (both 2.7%) and Brent (2.4%).

Bottom of the league, but still showing a respectable price rise of 0.7%, was Enfield. Also showing smaller price increases than the London average were Ealing (0.9%), Kensington & Chelsea (1.1%), Croydon (1.2%) and Tower Hamlets (1.3%).

Hometrack said: 'The strongest price rises tend to be in the boroughs which offer relatively good value or have very close transport links with central London.'

Building society Nationwide publishes its March house price index for the whole of Britain next Thursday. It is expected to lift its full-year house price inflation forecast from the current 6%. Mortgage rival Halifax also puts out its version of the March index next week.

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