Supply and Demand: The UK Property Recovery

Following 15 years of boom, the property crash of September 2007 saw house prices around the UK plummet - but the recovery has been far from uniform, with regional variations in supply and demand creating a highly localised picture that indicates some areas in the UK are bucking the housing trend.

The national average market hit a trough in February in its climb back into the black. Today prices are up by approximately 10 per cent, but the top end London market is setting itself far apart from the rest of the country. Whilst a glut of property built during the boom stagnates in estate agents' windows in regional capitals such as Manchester and Leeds, areas in London, including Kensington and Chelsea, witnessed a rapid recovery.

Industry commentators pinpointed lack of supply as the key to the slow take up in the market in general. Massive governmental stimulus, in the form of car scrappage, a drop in VAT, reduction in interest rates and the banking bailout, have all worked to keep the homeowner in control throughout the recession. The mortgage and base rate cuts, in particular, have offered many a level of security that previous generations have not seen, meaning that the percentage of forced sales has been kept at a minimum. Whilst buyers and sellers remain cautious the supply has remained modest and the market fairly static.

In London, however, the story is very different: the Land Registry House Price Index, released in June 2010, indicates that London's monthly change of 0.7 per cent is the third consecutive month in which the figure has been positive, with the average house in London now worth £338,708 and annual growth continuing to overtake that of England and Wales as a whole.

Boasting the highest annual price change, London saw an increase of 14.2 per cent, whilst Middlesbrough experienced the greatest annual price fall with a movement of -9.2 per cent. Within London itself there are a wide range of local variations: the borough with the highest annual price rise is Kensington and Chelsea, with a movement of 21.2 per cent, whilst both Barking and Dagenham and Newham experienced the smallest annual price rises, with movements of 4.5 per cent.

The hugely commoditised nature of the Capital has always set it apart from the rest of the country. The international contingency has played a large part in defining the property market's independence from country-wide trends and foreign buyers continue to play an important part in local demand, especially in the climb out of recession. In London particularly, many international cash buyers are taking advantage of the weak rate of Sterling, with Europeans making up 70 per cent of all foreign buyers in Kensington and Chelsea alone. And whilst banks continue to offer poor returns, for those that have capital to invest, property presents itself as an attractive mid-term alternative.

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Author (bythesea). Submitted on Thu, 2 Sep 2010 Time: 3:34 PM

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