London housing shortage pushes prices higher

A fundamental shortage of property for sale in London has pushed property prices to a record high, with very few new homes being built. Housing supply is falling while demand is growing, generating a mini boom in prime central London that could eventually benefit homeowners across the capital.

Various property price indexes reveal that homes at the high-end of the London property market are defying the wider UK housing market slowdown by proving big sellers.

Whether property for sale in Belgravia, property for sale in Chelsea or even property sale in Fulham, no matter where you look in prime London, the property market is being underpinned by a chronic shortage of homes, while demand for homes in London is continuing to soar.

In west London, for example, most Fulham estate agents and Chelsea estate agents agree that residential property prices across pricey areas like Chelsea and Fulham are rising, with some sought-after homes achieving over the asking price, due to increasing buyer demand, fuelled by city bonuses and more overseas purchasers.

Peter Young, managing director of John D Wood & Co, said: "Stock levels remain low across London which is frustrating the increasing number of purchasers keen to move, many of whom do not need mortgage financing for their onward purchase."

This strong demand is expected to ripple out to other parts of London once property prices further out of central London start to look increasingly attractive in relation to values in the prime market.

"With property prices in desirable areas like Belgravia and Chelsea expected to continue rising in the foreseeable future, it is highly likely that residential property values will also appreciate in other parts of the capital, including secondary locations," said Adam Feather, head of Robert Anthony estate agents.

In fact the latest Rightmove report shows that vendors across London raised asking prices by the most in seven months in September 2011 as a lack of properties for sale and increasing demand bolstered values. The study shows that asking prices rose 2.4 per cent from August.

"London's buoyant property market looks set for a brisk autumn as buyers chase a more limited choice of fresh properties," Miles Shipside, commercial director of Rightmove, said in the report. "With the continuing turmoil in the financial markets, and the threat of a Greek default, we are seeing a flight to safe assets."

Renowned property investor Neil Young, CEO of the Young Group, has amassed a small fortune from investing in properties in London thanks to sold rental returns and a good level of capital appreciations, and he expects this growth to continue.

"I specifically buy homes in London because it is a world city, with a great deal of demand. I strongly believe it has good future growth prospects," he said.

The prospect of capital growth is an attractive proposition for property investors and homeowners looking to one day move up or down the housing ladder. For a lot of people, property has become part of their investment strategy. With saving interest rates at a historic low and private sector pensions in a rather sorry state, many people are now relying on their homes to fund their retirement.