London's house prices soar for now - not so elsewhere

House prices nationally jumped almost half a per cent in September, says property analyst Hometrack in its latest data - the fastest rate of growth for two years.

But lift the lid on the data and the warping effect of London is easy to spot.

For a start, no region other than London achieved monthly growth of more than 0.3 per cent for September. It was London's massive 0.9 per cent growth that pulled up the average.

So what's happening in the capital? Online estate agent Rightmove, which publishes its own house price index, sheds a little light. Rightmove's latest numbers show that asking prices in prime London - that's Kensington and Chelsea, Westminster and Camden (to net in the Regents Park area) - are all up by over 30 per cent in 12 months.

Central, secondary boroughs - Islington, Hackney, Lambeth - are up around 20 per cent.

These are vast numbers, so I called Rightmove to ask for the volumes of property instructions backing its data. Here's the result for August 2006: Kensington and Chelsea, 490; Westminster, 677; Camden 1,154; Islington 609; Hackney, 569 and Lambeth, 1,198.

The volumes are big enough to be credible. But these are asking prices, only, mind - not sales prices achieved.

The Rightmove numbers suggest a market in which very greedy vendors exploit a situation in which there is little supply and quite strong demand.

Back to the latest Hometrack data, and this is clearly born out. Hometrack says that over the last six months supply in London is down by about three per cent, compared to demand, which is up by more than ten per cent.

Only in London and the South East is the relationship this way round. Every other region in the country is experiencing a situation where the rate of supply is growing faster than the rate of demand.

So how long will London remain the odd man out? Are there signs of the end of the trend? Probably.

You would expect the gap between asking and sales prices to widen toward the end of a cycle, as vendors' expectations drift out of line with emergent buyer caution. By that argument Rightmove's vast increases in asking prices might be masking a market which is already cooling.

It's also worth looking at initial asking prices relative to sales prices achieved. Hometrack says that for London, this ratio of asking-to-sales price has fallen for three months in a row.

That would be a sign, if not a certainty, that London's inflation is coming off the boil.

- Richard Dyson, Financial Mail on Sunday

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Comments

[Homes in London]

There are also many "odd" locations in London itself that have changes that are vastly different, both in terms of house prices and house price growth! So London itself can be broken down.

[Lambeth]

Rightmove may have one set of figures that are completley different to (say) Nationwide or RICS. How can we determine which figures are the most accurate. I say this because I am suprised with Lambeth being said that it is has risen by 20 percent?!