The Office of National Statistics (ONS) has released data showing London average house prices are over £500,000 for the first time.
As the capital’s average house price reaches £514,000 an increase of 19.1% year on year, the average for the UK hits £272,000 up 11.7% over a year.
Prices of houses in Scotland have also increased to a new high with an average of £198,000 up 7.6% year on year.
For properties in London the rise above £500,000 also increases the cost of stamp duty costs to over £20,000 as the tax rises from 3% to 4%.
The continued rise in house prices means first time buyers would require a higher deposit, larger mortgage or higher earnings to purchase their first home.
Million pound homes to increase
The number of properties worth more than £1 million is set to increase 47% to 11,000 by 2018 according to Savills, up from 7,529 in 2013.
Over the past five years the £1 million market has increased by 165% in the capital helped by demand from overseas investors.
For remortgage buyers living in London the higher property values give them an opportunity to release capital which they can use to improve their home such as adding an extension, new bathroom or kitchen.
London has also seen a shift in the sales of £1m plus with the central boroughs of Kensington & Chelsea and Westminster share falling from 50% to 30%.
Now homes in Hammersmith, Fulham, Wandsworth, Richmond upon Thames and Camden experience 500 sales a year in this price range. Other areas are likely to follow in the next five years such as Blackheath, Dalston and Acton.
According to Savills the growth in £1m plus homes in London will be helped by the increasing number of new build properties by 2018.
With higher house prices in the capital buy-to-let landlords will look to outer London for affordable properties to help improve rental yields.
Price rise could be slowing
Prices across the country have increased strongly year on year according to the Office of National Statistics.
| Area | Change | Value |
|---|---|---|
| London | 9.8% | £514,000 |
| South East | 9.8% | £337,000 |
| England | 12.0% | £284,000 |
| East | 10.6% | £282,000 |
| UK | 11.7% | £272,000 |
| South West | 7.1% | £246,000 |
| West Midlands | 7.3% | £198,000 |
| Scoltand | 7.6% | £198,000 |
| East Midlands | 7.6% | £187,000 |
| North West | 7.7% | £175,000 |
| Yorks and the Humber | 5.0% | £174,000 |
| Wales | 7.4% | £171,000 |
| North East | 9.5% | £156,000 |
| Northern Ireland | 4.5% | £139,000 |
The ONS have said that the price paid by first time buyers in July is 13.5% higher compared to this month last year and for owner occupiers the rise was 10.9%.
House price rise in London and the South East of England offers existing homeowners such as remortgage buyers or equity release mortgage buyers to access money from their property for home improvements, holidays or even buy a more expensive home.
There is evidence that house prices are slowing due to a combination of high prices and stagnant incomes and tighter regulations on affordability mean it is more difficult for first time buyers, home movers and remortgage buyers securing mortgages.
Figures from the Council of Mortgage Lenders (CML) show first time buyers have on average a deposit of 16% and need a mortgage of 84% of the property value. They borrow 3.41 times their income and have an average income of £51,500.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to improve your quality of life or even pay university fees for grandchildren.
Learn more by using the equity release calculator, mortgage monthly cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
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