Biggest housing boom since 80s

Jane Padgham12 April 2012

LONDON'S housing market is in the grips of an Eighties-style speculative boom, with the recent surge in property values triggering a scramble to snap up available homes before prices rise even higher.

John Wriglesworth, housing economist at property website Hometrack, said: 'Price rises leading to more price rises have not been seen since the late-Eighties, when the market was last in a speculative boom. The slowdown experienced last year is now a distant memory and double-digit house price inflation for London this year is a likely prospect.'

Hometrack lifted its full-year London house price inflation forecast from 6% to 10%. A poll of more than 900 London estate agents by Hometrack found the average price of a home has risen by 1.8% over the past month, after increasing by 1.7% in February.

All London's 33 boroughs have enjoyed rising prices this month. Top of the league was Havering, where prices leapt by 4%. Prices also rose strongly in Harrow, the City of London, Waltham Forest and Brent. Bottom of the league, but still showing a respectable price rise of 0.7%, was Enfield. Also showing-smaller price increases than the London average were Ealing (0.9%), Kensington & Chelsea (1.1%), Croydon (1.2%) and Tower Hamlets (1.3%).

Hometrack said: 'The strongest price rises tend to be in the boroughs which offer relatively good value or have very close transport links with central London.'

The strength of the housing market across most of the developed world was highlighted in new analysis in The Economist magazine which found that strong property price rises have underpinned global growth by encouraging consumers to carry on spending.

'If there is one single factor that has saved the world economy from a deep recession it is the housing market,' it said. 'By boosting wealth, higher house prices encourage homeowners to spend more. They also allow owners to borrow more against the rising value of their homes.'

The magazine, which has constructed a new global house price index, said that since 1980 Spain has seen the biggest rise in house prices in real terms, by 124%. Britain and Ireland came second, with gains of about 90% . Average real house prices in the United States have risen by a modest 20%. Germany is the only country where house prices have fallen in real terms over the past two decades, by 21%. Of the big cities, the largest increases in real terms since 1980 have been in Dublin (207%), Madrid (149%), New York (112%) and London (103%).

The housing market boom has been driven mainly by low interest rates. In addition, the stock market slump has encouraged investors to shift their money out of shares into the relative safety of bricks and mortar.

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