London House Prices Masking UK Economic Woes
House sales in London enjoyed the best rise in prices for five years in January. New Year sales in the capital picked up considerably and resulted in a 3.5 per cent increase on house prices in December 2012. House price in the UK capital are up to an average of £480,890, a 9.7 per cent increase in comparison to the same time last year.
One of the reasons for the upsurge of house purchases in the capital is due to executive housing developments along Canary Wharf and the old Battersea Power Station – the latter attracting wealthy foreign investors who are splashing out around £6m on the luxury apartments. Meanwhile they are driving house prices up across the city. According to recent National Statistics, house prices across the UK also saw a 0.2 per cent rise but this could just be a reflection of the steep rise in London.
It is estimated the new properties make up for 29 per cent of sales and housing market analysts representing Rightmove feel the influx will balance supply and demand. Not if they are all been snapped up by Europe´s elite as investments they won´t! Foreign investors with concerns about the unstable economic situation in the Eurozone and China helped to boost the value of London house prices in 2012. Meanwhile, many British families formerly living in London moved in boroughs in the South-East.
UK house prices predicted to climb
A new report published by the Centre of Economics and Business Research predict house prices in the UK will enjoy a 0.8 per cent increase this year and surpass the 2007 pre-crisis peak in 2014. The government backed Funding for Lending Scheme which makes loans available at affordable rates has returned confidence in the market, but is another economic crisis waiting to happen.
Critics of the scheme claim the banks have been given too much control over low-interest loans and the scheme is open for corruption. Low repayments on the loans expire after four years and could leave borrowers struggling to meet repayments. When the bubble bursts the crisis floods the country.
The steady increase in house prices since the FLS was introduced in August 2012 helps the statistics appear that the economy is growing and Britain is finally recovering from a double-dip recession. In comparison however, the British Retail Consortium published a survey which revealed one in five British families cut back on their Christmas spending last month – a fairer reflection on the economy than a rise in London house prices purchased by wealthy investors seeking profitable rentals in the UK.