Since the financial crisis of 2008, the gap in house prices between London and the rest of the UK has continually widened to levels never seen before:
This phenomenon has offered fabulous returns and capital growth to investors and home owners across Greater London for the last few years.
What are the prospects for the rest of the UK and London in the coming years?
I was in Southampton last week assisting a London developer in assessing the feasibility of a potential development of eight new flats on the top floor of a property they already own in the city. The property is situated in a desirable and up-and-coming part of Southampton within walking distance of central amenities.
On virtually every measure, almost every desirable ‘out of London’ UK urban location is more affordable than comparable locations within Greater London. This underpins more stable end demand from would-be local homeowners and investors in these locations. This contrasts to London where prices in many areas have soared beyond the reach of most buyers affordability dampening demand and thus now reducing sales volumes. Price rises in London have created an affordability gap.
At the same time, housing development and investment across the UK has been subdued in recent years leading to a lack of supply:
I think that the affordability gap in London is here to stay. The situation would appear unlikely to result in disastrous house price falls as there is still constrained supply in most parts of London when compared to underlying housing requirements. However it may lead to stagnation and thereby uncertainty for developers looking to sell their product to home buyers. Although there will be pockets of opportunity these become harder to identify. It’s never the wrong time to buy a home to live in and this underpins demand. Globally the UK remains a stable investment proposition and London should continue to attract investment from overseas which also underpins demand.
However this situation ought to drive developer investment into housing developments in well established out of London urban locations across the UK as developers look towards more stable and real demand levels and constrained supply to deliver returns.
Local authorities across the UK are under pressure to provide more new housing which will offer further support to developers where in the past planning may have been more difficult to obtain:
I think that there are fantastic opportunities inside London but also out of London and we are here to assist in enabling these opportunities with our knowledge and expertise.