London house prices exacerbating first-time buyer problems

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Tuesday 24th July 2007

First-time buyers in London are facing affordability problems as average house prices in the city have exceeded £300,000 for the first time, it has been suggested.

The Halifax House Price Index for the second quarter of 2007 shows the average purchase price of property in the capital has risen to £313,122, a quarterly increase of 4.9 per cent.

Group economist Tim Crawford points out that those already on the property ladder could be facing a financial burden as the value of their house may now exceed tax thresholds.

"The average property price in London is now above the inheritance tax threshold of £300,000 whilst the average price in the south-east has risen above the three per cent stamp duty threshold of £250,000," he explains.

"We call on the government to raise the stamp duty thresholds and the inheritance tax threshold in line with past increases in house prices over the past decade."

Mr Crawford adds that Halifax urges the government to link increases in property-related thresholds to the level of house price inflation in the future.

Property listing firm Rightmove also recently published its House Price Index.

While Halifax bases its index on about 15,000 sales over the course of each month, Rightmove takes the average asking price of domiciles listed by 12,000 estate agents nationwide.

Figures for July 2007 show the price asked on average by London sellers is now £394,730, up from £387,898 in June.

Commercial director Miles Shipside comments: "Shortages of supply will remain more acute in the capital, as suitable building land is harder to come by and demand will continue to grow."

"The consequent upwards pressure on prices can be absorbed by highly paid City workers, but it exacerbates the existing problems for key workers and first-time buyers in London," he adds.

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