Why London Isn't The UK

The votes are in and have been verified and the results are ... well, almost unanimous when it comes to the property industry experts whose predictions for 2011 have graced this blog in recent weeks.

Most seem certain 2011 and 2012 will be muted at best, or more likely involve price falls across the mainstream market; almost everyone believes UK-wide transaction numbers will be depressingly low and mortgage availability as bad as today.

There is even stronger agreement that London, especially its prime areas, will see gentle rises next year and more spectacular rises thereafter.

Given that disparity between London and the rest of the UK, is it not time to stop the increasingly implausible claim that some industry insiders make that central London’s housing market fortunes ‘ripple out’ to other parts of the country? They say that what Kensington sees today Cornwall sees in a year’s time, and Kinross a year after that – but is that really the case?

For surely now there is such a unique, atypical market in central London that it operates in an entirely different orbit to that of the rest of the UK?

Unique factors include the high proportion of overseas buyers in much of prime central London, its much higher proportion of cash buyers and concomitant smaller number of mortgaged properties, the City bonus culture, and of course the extremely high prime purchase prices.

These factors are replicated in almost no other part of the UK, except for tiny enclaves of the Home Counties where international or prestigious private schools attract clusters of similar buyers to those who inhabit central London.

If the UK has more unemployment, higher tax, lower spending and therefore fewer housing transactions next year – exacerbated, perhaps, if interest rates move up – then almost every economist suggests these will have much less effect on central London than on Greater London or the rest of the country.

In other words, Planet Prime continues to do well because its drivers are not just different at the moment, but will be different for the foreseeable future. Therefore while it is good news that central London is doing well, it has almost no direct influence on how the rest of the country’s market performs.

The sooner that is accepted – including by those journalists who short-sightedly use central London as a symbol of the wider housing market – the more accurate and relevant our coverage of property issues will appear.

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