Amidst all speculations in the London property market, 2016 begun on an interesting note, with house prices in the financial capital increasing by 5.4% during January-February.

While price inflation might dishearten first-time homebuyers, this indicates that the demand for housing continues to rise in the capital city, and there is a scope for innovative housing to overcome the gap.

Several surveys conducted by property companies and research firms revealed that Inner London witnessed the highest price surge of 8 per cent. At a national level, the price increase of homes was 2.9% for the first two months. However, an interesting development shows that there has been a 5% increase in the listings of properties nationally. It necessarily does not mean, that more properties are added to key areas such as London and that they are up for sale. At the same time, the rise in listings is nowhere near the demand for quality housing in London. When compared to the rest of the nation, the demand for housing is the highest in London, and it is impacting both house prices and rent.

house price

The demand for housing is so high that some of the cheaper districts are also witnessing a rise in prices this year. For instance, in Barking and Dagenham, it has been reported that asking prices have increased by 23% when compared to last year. This in fact, provides a good insight into the London property market, especially for bridging the demand-supply gap.

One of the worst affected segments for homebuyers, given the price inflation, is that first-time homebuyers might find prices too steep and unaffordable. The government is doing its best to ensure that first-time homebuyers are also brought under the housing net. As part of the Help-to-Buy programme, the government announced interest-free loans up to 40% of the value of a newly-built home for the benefit of first-time home-buyers. This has to be evaluated to ascertain how many first-time homebuyers took advantage of the programme.

It is widely known to all that the prices of the properties are out of reach for working professionals in London, owing to vast differences between the earning capacity and the housing prices. Rather than creating a home for themselves, working professionals find affording a home as a lifetime challenge. The government’s plan to offer interest-free loans needs the active support of the stakeholders of housing. However, in the absence of any adequate housing, this programme may not succeed because despite disposable incomes working professionals are not able to afford quality homes.

The 5.4% surge in property prices may benefit property companies as this sector is expected to continue the growth curve in 2016. However, from a long-term perspective, we need to speed up the pace of constructing houses so that a vast number of units are added to the housing pool to cool down the sector. We should continue to explore innovative housing models to ensure that everyone has access to proper and quality housing.