London garage sells for £251,000: why?


Ed Miliband in Highgate

A double garage in Ed Miliband's stomping ground of Highgate was sold at auction yesterday for an astonishing £251,000. That's £80,000 more than the average house in the UK is worth, and three times the guide price that the auctioneer had put on the property.

So why did it fetch such an incredible figure, and what does this mean for the housing market in the UK?

The garages are nothing special. They have space for a couple of cars, or for the overspill of belongings for those crammed into small flats in the area, but other than electricity, there's nothing more to them than any other garage in the country.

So why did they fetch so much?

Unlike in other parts of the capital, there isn't a major parking problem. Highgate is far enough out from the centre for there to be on-street parking for residents (although you need a permit). So unlike the garage which went on sale for £500,000 in Knightsbridge last year, the appeal of this garage is likely to lie in its development potential.

The auctioneer James McHugh, of McHugh & Co told the Daily Mail that the price was likely to have shot up because someone thinks there's development potential in the building - despite the fact that there's no planning permission granted.

They may have been inspired by a former garage in the area which had been roughly converted into a studio flat and was on sale for £250,000 this summer. Developers could squeeze two of these flats out of the building and double their money. Alternatively, if they are given permission for something more elaborate, a two-bedroom property could fetch £800,000 - easily making the investment worthwhile.

What does it mean?

This tells us a great deal about the property market in this particular area. First, property is already worth enough to make even a potential site worth a great deal. Foxtons says that the average one bedroom property there costs more than £380,000, while a 2 bedroom property sells for almost £600,000, a three bed for around £975,000, and four beds for around the £1 million mark.

Second, prices are rising at a phenomenal rate too - increasing the chances that an investment will pay off. Zoopla says that the typical property increased in value by 7.36% last year, 11.53% over the last three years, and 16.85% over the last five years. Given that these were some of the most miserable years for property in the UK more widely, clearly if you can get a bargain property here you can make a small fortune.

Wider implications

The fact that Highgate has bucked broader national trends means that we cannot infer a great deal from this sale as to what it means for the price of properties more generally. All we can tell is that prices are set to continue rocketing in this leafy suburb of North London.

Meanwhile, however, everywhere we look there are signs that the market is on the up elsewhere - albeit in a more modest way. Today Halifax has announced that house prices are rising at 6.2% - their fastest rate in three years. The average price of a home has risen to £170,000.

At the same time, Santander is saying that 10% of people want to buy a property in the next 12 months, and 57% of people think that house prices are going to grow over that time. The study highlighted the government's help-to-buy scheme as a key factor in the growth of optimism.