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London experiencing a 'ripple effect' as house prices in outer boroughs out-pace central districts

Wed 15 Feb 2017

The analysis, by estate agent Jackson-Stops & Staff, reveals prices in five of the most expensive prime central London boroughs, including Kensington & Chelsea and Camden, have risen by 110 per cent over the past 10 years, from £451,000 to £947,000, but that only 2.5 per cent of this growth was in the last year.

Conversely, 20 per cent of the price growth in the five cheapest boroughs has happened in the last 12 months, with values rising a total of 68 per cent in the last decade from £203,000 to £344,000 in areas such as Croydon and Barking and Dagenham.

“Buyers and sellers need to take an important message from this, specifically that a long-term view of the property market is essential to decision making processes," says Toby Whittome, Jackson-Stops & Staff’s sales director in London.

"Annual fluctuations in prices caused by macro-economic and political issues, as we are seeing right now, should not obscure the big picture."


Inner London

Last year, the prime property market was hit by stamp duty tax increases, with many areas of inner London experiencing a fall in the prices of homes.

A boom in luxury high-rise homes along the South Bank has led to this area becoming London's strongest-performing neighbourhood, with the number of sales up an astonishing 114 per cent year on year.

Prices are tipped to continue to rise in the borough. Also, with a studio flat at One Blackfriars on the market for £10 million and a one-bedroom flat in Peckham listed for £225,000, it is one of the most, if not THE most diverse area of London, offering something for everyone at both ends of the price spectrum.

Plus, savvy buyers are being lured to the borough because of the new Bakerloo line linking Elephant & Castle and Lewisham to the West End, even though the proposed route is still 10 years away. However as said earlier, it has to be a long term investement.

It's a similar story in south London's Lambeth region. Due to recent regeneration and affordability compared to neighbouring ares, it was one of 2016's top fastest-rising boroughs in terms of house price growth.





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Outer London

As we expected, Londoners have been priced out of central areas so no wonder the demand for outer regions has increased, therefore leading to a rise in prices.

Over the past year, prices have risen fastest in the cheapest borough, Barking and Dagenham, where average house prices are up 17 per cent from £246,955 to £288,873.

The east London regeneration hotspot was recently named as the capital's most profitable buy-to-let location, which suggests first-time buyers are likely to be competing with landlords for starter homes, thereby pushing prices up further.

London's population is steadily rising and housing stocks are still too low across the capital, which is also fuelling house price rises in the suburbs.

Slowing prices are good news for those struggling to get on the housing ladder but bad news for owners as prices can only rise so far before buyers start to be priced out of more so-called "affordable" areas.

"With the negative combination of the rising cost of living eating away at modest pay increases, it is hard to see how property prices can keep rising at a fast pace," says Miles Shipside, Rightmove director.

"If it becomes impossible to buy, sellers will also take a hit on the price of their home due to a drop in demand."


Now, with initial point of this article being regarding how looking to the future can influence your decision, the introduction of HS2 could see this 'reverse ripple' hit beyond London's outer borough's.

Lloyd’s Bank recently reported that an hour-long commute to central London will save on average £380,000 in house prices, even taking rail fare into account.

With plans for HS2 to open in 2027, the journey from Birmigham to London will be cut to just 49 minutes, meaning we could see demand in central areas of London fall dramatically, and prices in the Midlands rising due to growing demand.

Coming up with an almighty deposit for London property has always been a more than arduous task. However, it’s now not only a big ask, but a huge risk.

House prices have increased in the capital rapidly in previous years and have always proven to be a worthy investment due to strong growth, but multiple factors including the EU referendum and changes to stamp duty legislation have created a ‘reverse ripple-effect’ which has seen property values stagnate at best.

Year-on-year, house prices across the city have fallen on average 6.7%, with certain districts experiencing a 10-13% loss.


As such, forecast trends show a rise in demand for property in 'commuter areas' such as Peterborough, however with the introdution of HS2 this will branch out north-westwards with stations proposed in Bickenhill/Birmingham International & Birmingham City Centre.

We therefore expect this ripple effect to reflect in Birmingham and the surrouding areas, with investement already starting in developing housing in Digbeth and Central areas of the second city.

"Thelma, I was very pleased with the letting process. To have the property let & earning rental just over a week after completion is fantastic. Thorough vetting process gives me confidence that the tenants are good, £850 rental is at the top end of expectations, Cleaning / minor repairs / elec testing all done very efficiently. Thanks to you, Ian, Dawn and Amanda for a job well done. It’s much appreciated and I owe you some chocolate. N Crowe"
N Crowe. October 2017