House prices: Property in the suburbs will rise faster than London

Brighton

The experts are predicting enormous house price growth in central London over the next five years - when prices will increase by a quarter. However, they say that even this phenomenal growth will be eclipsed by the rising cost of properties in the suburbs.

So where are prices going to rise the most, and why?


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Slowing London

Savills is predicting that sales of expensive properties in central London are likely to slow in the run up to the election in 2015. This is partly a fear of a potential mansion tax - in an area where increasing numbers of properties are pushing into multi-million pound territory.

There are also concerns over suggestions of a tax on property held by people based overseas. The huge numbers of central London properties owned by the international jet set are under threat from a tax hit that could put off potential future buyers.

The estate agent predicts that after rising 3% next year, prices in central London will actually fall 1% in 2015 while buyers wait to hear who will be in power - and what approach they intend to take to very expensive property. Whether prices then rebound, or face modest falls and slower recovery, depends on who is in power and what policies they adopt.

Suburbs

By contrast, demand for property in the suburbs is primarily driven by demand from UK buyers, and as the properties are largely less expensive, fewer are threatened by any possible mansion tax. As a result, prices are predicted to rise 6% in 2014, and 26% over the whole period.

Savills says that in the autumn it saw the first signs of growth in the suburbs outpacing the capital. Sophie Chick, residential market analyst at Savills says: "The gap between prime central London and its prime commuter markets has probably peaked and wealth has finally begun to flow out of the capital. We anticipate that 2014 will be the year when the value gap between London and the lead suburbs and prime inner commuter belt finally begins to narrow. We expect 2014 to be the year of the super suburbs."

These suburbs are likely to include places such as Kingston-Upon-Thames, Weybridge, Rickmansworth and Harrow.

The further you go from London, the less you are expected to see prices rise. At the moment, prices further afield remain up to 25% below the peak, and the 7% stamp duty threshold has seen a real ceiling develop at £2 million. It means that Savills is predicting a 25% rise in what it calls the 'inner commute' and includes towns like Guildford and 23% increase in the 'wider commute', which stretches to places like Basingstoke.

For buyers, it seems that the next five years is likely to price even more people out of zones one and two, and push thousands more people onto trains bound for the home counties - and beyond. The days when more than half your working day is spent on a train may not be far off.

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Factors damaging property value
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House prices: Property in the suburbs will rise faster than London

Pre-recession, homeowners would give little thought to the idea that local repossessions could affect the value of their home. 101 repossessions were recorded every day during the third quarter of 2011 and it has become a real concern.

A new crime map introduced in March 2011 was welcomed by buyers, but approached with trepidation by homeowners concerned about the impact on local property values. The map allows users to view crime statistics online by postcode to find out the crime rates and types of crime in any area.

It is widely recognized that schools with a good reputation increase competition and property demand within a local area, which in turn increases the values of property within the catchment area. Lose the school and the demand will cease too.

The devastation caused by flooding in recent years doesn't appear to paint a positive picture for homeowners faced with the financial and emotion cost of a huge clean up, insurance complications and the potential damaging effect on property values.

The proposed high speed rail link is depressing house prices for thousands of homeowners on the route and many homeowners feel helpless to stop tumbling property values.

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