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For the first time in 41 years, London home prices are more than double the national average.

According to global real estate consultancy Cushman & Wakefield, the average London home price is now double the UK average for the first time in 41 years.

London homes are now twice as expensive as the average UK property for the first time since building society Nationwide released house price data in 1973. Although wages in London have increased, they have not kept pace with house price increases - according to the Office for National Statistics, Londoners earn just 30% more than the UK average. Anecdotal evidence suggests that homeowners are fleeing London, especially for key commuting hubs, to take advantage of the large price disparity between London and regional housing markets. According to Nationwide's house price index, the new average London house price is £362,699, which is just over double the UK average of £178,124. To put this in historical perspective, London house prices have been 1.5 times higher than the UK average for the last 41 years.

"Cushman & Wakefield's UK residential development and investment team," said Jack Simmons of Cushman & Wakefield "House prices in London continue to dominate the UK, but affordability is beginning to bite for residents of the capital. This is the first time that London homes have been valued at twice the national average. We will see a split in the UK, with Londoners forced to rent while their regional counterparts have the option to purchase. In the future, I can see a younger generation in London opting to rent rather than take on long-term debt." villa

Other important London residential metrics in Q2 2014 include:
Home price growth: London house prices are now 19% higher than they were in 2007 (+50% for prime).

House price predictions in London: The consensus estimate for mainstream London price growth this year is 9.2 percent, and 7.3 percent in 2015. Because of the good start to 2014, 5.1 percent has already been realized.

Forecasts for UK house prices: The overall outlook for the UK housing sector has been upgraded slightly in the last quarter. Price growth is expected to increase by 7.3 percent in 2014 and 5.6 percent in 2016.

Mortgage payments on a 95 percent loan to value mortgage in London amount to 57 percent of net income. This proportion is expected to increase even further as interest rates rise. This upper limit was about 69 percent prior to the global financial crisis.

Affordability in the United Kingdom: Affordability in the region is fair, with room to absorb expected house price increases and interest rate hikes.

Mortgage approvals: The Mortgage Market Review (MMR) is adding additional administrative pressure to mortgage applicants, which could explain the 7% drop in approvals in the first quarter of 2014.

Listed housebuilders: The FTSE All Share had risen 59 percent in the five years to May 2014, compared to an average of 141 percent for housebuilders. The shares of the sample housebuilders have dropped 15% on average since February, compared to the FTSE All Share's flat results.

Interest rates: Economists foresee the first hike in the first half of 2015, but it could happen sooner given Mark Carney's recent remarks (Mansion House speech June 2014). The median forecast of the 32 economists surveyed for the Treasury Consensus is that interest rates will be 0.9 percent by the end of 2015 and 1.6 percent by the end of 2016. (0.5 percent currently).
Exchange rates: The value of the pound against the US dollar has risen to its highest level since mid-2008.

Recent construction data reveals a distinct difference between the London residential market and the rest of the United Kingdom. 

Since 1980, new housing has accounted for 8% of all new construction in London; but, since the global financial crisis, this figure has risen significantly to 20%. The photo is very different outside of London and the South East. For six of the 11 UK regions, construction production is more than 25% lower than it was before the global financial crisis. Overall, the building industry is doing well, and regional developments should be forthcoming (planning applications have picked up significantly in some markets). The long lag back to average dwelling starts is frustrating given the undersupplied existence of the UK market, but the strength of demand versus supply remains an opportunity for willing investors.

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