London’s property prices keep rising on sustained low supply

 
Tim Wallace
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<a href="/house-prices">London's house prices</a> hit a record high in April while rents are set to keep soaring through 2012, two reports show today.

The average asking price of a property in the capital rose to £464,944, up 2.1 per cent on the month and 7.9 per cent on the £431,013 seen last April, according to Rightmove’s house price index. That brings the rise in prices to 6.9 per cent through 2012 so far.

A lack of supply is driving up prices, with the number of properties coming to market down five per cent on the month.

Low supply and high prices have driven the rental market, too, where monthly prices rose 9.6 per cent through 2011, Hometrack revealed today.

The increase slowed in the second half of the year simply because squeezed tenants cannot afford many further rises, with Hometrack predicting a more moderate rise of two to three per cent this year.

Nonetheless, it leaves rents well above those in the rest of the country – in London 22 per cent of lettings for a typical two-bed property are over £2,000 per month, while in the rest of the country just four per cent cost more than £1,000.

“With no major improvements in mortgage availability likely in the near future, rental demand is set to remain strong,” said Hometrack’s Richard Donnell.

“There is however a limit as to how high rents can go as affordability constraints continue to squeeze household budgets. Increased occupation of rented housing through greater sharing is one solution to affordability pressures – especially in London.”