Regular readers will know that we think that property across much of the UK is still grossly overpriced. Inflation is doing its job, of course, and house prices are falling steadily in real terms – and often in nominal terms too – across the country. However, there is a way to go before we’d want to step in as investors in most places.
That said, two articles in the weekend papers make the point that if you already own property, it isn’t so much the absolute price as the value of the trade you make that counts.
Take the difference between London prices and prime country prices. Since 2007, London prices have soared (up 9.4% in 2012 alone, according to Knight Frank) while prices of nice houses outside London have fallen (down 4.3% in 2012). So sell your London house to buy in the country today and you’ll get a much, much nicer manor than you would have in 2007, when the gap between the two was rather smaller.
The Telegraph offers some tempting examples. In Islington, £650,000 buys you a two-bedroom flat on the ground floor looking out over a busy road. In Loxton in Somerset, it gives you a four-bedroom house with an acre of land and £30,000 to spare (although you will find your stamp duty takes care of most of that). In Rye, East Sussex, it gets you the middle class dream (The Old Vicarage) – a Grade II house dating from 1600 with “pretty cottage gardens” and fabulous views. Oh, and £65,000 left over.
In the FT, Francesca Steel makes the same point about the differential between Edinburgh prices and London prices. In Edinburgh, prime property prices are down 18% from their peak, and there has apparently “rarely, if ever, been a bigger gap between values in prime London and prime Scotland.”
This is, in turn, “fuelling renewed interest from buyers outside Scotland” as well as non UK buyers – according to Knight Frank 10% of prime property buyers are now foreign. Even the Russians are arriving: Steel points to four £2m+ sales to Russian buyers in the last year.
Clearly there is good reason for London prices to be outpacing other regions (safe haven demand, cash buyers, etc, etc) and the widening gap between the capital and the rest doesn’t for a second mean that prices in the former aren’t going to start falling, or that those in the latter aren’t likely to keep falling. Far from it.
But if you plan to sell a house in London and buy one elsewhere at some point, you may find that now is an excellent time to do it. It isn’t about the actual prices, it’s about the gap between the prices.