Market Commentary - September 2000
After the eye-popping growth of property prices in some areas of the country
at the start of the year, the latest figures deserve more comment than
simply 'but that's ludicrous...'. The current figures from the
Land Registry show 2 striking trends:
- The property market is cooling gently. Property prices have stopped
rocketing, but grew in all areas by between 1.4% and 4.4% in the 2nd Quarter
of the year. This is a Good Thing, since it means that the market is less
likely to nose dive.
- The disparity between
London & the South East and the rest of the
country continues to grow. At the start of 1997 a typical London property
cost about twice as much as a typical
Welsh property. During the 2nd
quarter, this had risen to 3 times - a whooping £128,000 difference in
Whilst the first point is merely of passing interest, the second is of
deeper significance. In order to get an 80% mortgage on a typical
property, you need to be earning roughly £50k per annum. This puts the
average property out of the reach of almost all public sector workers, and
the majority of the population. I believe that the disparity is simply not
sustainable and something will have to change. Some of the results may be:
- House prices in London will stabilise or fall, as people cease to be
able to move into the Big Smoke and more people want to move out
- It will become increasingly difficult to find teachers, health
workers, council workers willing to work in
They will either need
to commute a long way to work, or live somewhere that does not match their
- Pay may increase to levels that make London property more
affordable. This could happen in the private sector, but can you really
imagine nurses getting paid enough to afford £175,000 houses in the near
- The government may try to develop a scheme for 'reserving' some
property for public sector workers. If it does, the chances of a fiasco are
- Service sector companies, the powerhouses behind the growth of
London and the
South East over the last 10 years, will start to relocate to
other areas. Cambridge
is driving growth in East Anglia and a cable company
has recently overtaken a government shipyard as the largest employer in
the South West.
Expect this spread to continue as the employers look for
cheaper labour and the employees look to improve their quality of life.
I don't think the changes will happen rapidly - or even be noticeable for a
few years - but the current situation is not sustainable in the long term.
If I'm right....and it's a big if ... here's my Cunning Plan for moving out
of the South East and making your life easier.
Mr and Mrs Smith bought a typical London property 3 years ago for £120,000.
They had a mortgage of £100,000. They sell the property now for £190,000.
With that money they can buy a much nicer property in, say, Norfolk for
their £90,000. They no longer have a mortgage, saving about £800 per month ... and their
shirt collars don't have a layer of grime around them when they come every
Mr and Mrs Jones bought a house in Norfolk 3 years ago for £60,000. They
had a £55,000 mortgage. Their property is now worth £75,000. Mrs Jones is
offered a job in London on £5,000 pa more. She works out that she would be
able to afford properties around £95,000 - half the average price. Mr & Mrs
Jones decide to stay Norfolk. Wise People.
Disclaimer: All the above (with the exception of Land Registry data) is
purely my opinion, and could be complete rubbish. If you want to move from
Norfolk to London, that's fine by me.
July 2000's The Market
June 2000's The Market
November 1999's The Market including sellers packs
September 1999's The Market including buy-to-rent