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London house price gap hits 20-year high

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The gap between house prices in London and cities in the rest of the UK is higher than at any point in the last 20 years.

The Hometrack house price index showed the house price inflation now stands at 8.3% across the UK’s biggest cities.

Lack of supply, high demand and low mortgage rates have combined to push up prices across the country.

The difference between property prices in London and the rest of the UK continued to grow. Hometrack suggested that the London market was overvalued and that other large cities could soon narrow this gap.

Cambridge and Oxford saw prices rise faster than the capital, with growth of 11.2% and 10.6% respectively. Annual growth in London was 10%.

The only city where prices have fallen in the last year is Aberdeen, where property values dropped 2%. However many cities remain below their 2007 peak, including Edinburgh, Glasgow, Leeds, Manchester, Newcastle and Sheffield.

Despite growth of 7.4% in the last year, property prices in Belfast are still 46.8% lower than before the financial crash.

Richard Donnell, director of research at Hometrack, said: “City level house prices continue to increase as demand for housing grows in the face of constrained supply.

“A changing mix of buyers is compounding the scarcity of housing for sale with rising numbers of first-time buyers and investors buying property while having nothing to sell.

“Only a recovery in the number of moves amongst existing home owners or an increase in new supply will ease the current housing scarcity which seems unlikely in the near term.

“The gap between house prices in London and other major regional cities is at its widest level for 20 years. This highlights a seemingly over-valued London market, on a price/earnings basis, and the prospect of further price growth to come in the large regional UK cities.”


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