Guest Blogger Richard Donnell on the national sales market

15 December 2015 |

House prices move in cycles and London’s stellar run since 2009 is coming to an end. That is not to say house prices are about to fall but they do look set to under-perform the rest of the UK in the next few years. It shouldn’t be a surprise when you look at the growth over the last five years – 69% for the average London home and 88% in prime areas. House prices in the capital have accelerated away on strong demand from UK and overseas buyers, fuelled by record low mortgage rates and a chronic lack of homes for sale. The price gap between London and other major UK cities is at its widest level for 20 years according to the latest Hometrack UK Cities Index. Glasgow, Liverpool and Newcastle have average prices at almost a quarter of those in London, with Manchester, Leeds and Birmingham at over a third of those in the capital.

We have been here before. For example, back in 2001 the dot.com bubble burst after seven years of high growth in London followed by four years of sluggish growth. While there is relative value in regional cities we shouldn’t expect London style growth. The profile of demand is more one-dimensional, focused on domestic buyers reliant on mortgage finance. How the gap closes will depend on the relative strength of each local economy and how rapidly new jobs are created.