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Greater London House Prices set to grow by 7%

Greater London house prices are set to rise by 6.9% this year, according to real estate firm Cluttons. The Help to Buy scheme looks set to play a role as it will extend to all home buyers as of next year encouraging more buyers onto the market. As there is unlikely to be an equivalent increase in housing stock, sellers are likely to increase their asking prices due to the amount of competition and the high demand.

The Residential Property Forecasts report from Cluttons indicates that the increase in house prices could outprice many buyers who want to purchase property in and around London. Despite the fact that wage growth in London is slightly higher than the national average, earnings may not be able to keep up with the high rises in house prices in the area over the next two years.

Cluttons has forecast an 8.4% increase in house prices in prime central London, an increase on the previous figure of 5% reported by the firm. The annualised average was reported at approximately 4% for the next five years. It has also been stated by credit ratings agency Fitch that Help to Buy could artificially increase house prices without increasing the number of new homes being built. This could result in many properties becoming unaffordable despite the fact that mortgage lending has improved.

First time buyers are still struggling to enter the property market in London due to the return of bidding wars. There has also been a reduction in the availability of housing stock due to the number of buy-to-let mortgages being accepted in the area and the number of people renting their property and buying in other areas.

The rise in confidence in the housing sector, the recent government intervention and the lower mortgage rates look set to increase capital growth which has led Cluttons to revise their London house price forecast for this year. Cluttons has also reported that rental demand in central London has remained strong but there is little rental growth. Their forecast indicates that there will be rental growth of 3% in London this year, which is an annualised average growth of 4% until the end of 2018. As there are few signs that supply is set to meet demand, policy makers may make the rental market a priority in order to restore balance.

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