An influential group of British economists has warned that the recovery in UK’s property sector is underway across the nation, but that it risks creating a bubble in the overheating capital. London, claims a report by EY Item Club, saw house prices race upwards by 11 percent in 2013. The result is so dramatic that it’s distorted UK-wide growth figures. Without counting in London prices, house prices rose 3.5 percent. Factor in the capital and UK prices on houses jmped 5.4 percent last year. And the group warns the inflation train is now gathering pace beyond the city’s borders.
The improving economy, together with consumer support programs are predicted in the report to give ample confidence to housing builders to move forward with development plans in regional areas of the UK. Sufficient supply will do much to keep prices there under control. But with housing shortages most acute in London, where the greates employment growth is likely to take place, there’s a serious danger that runaway price hikes could become the norm.
“As a result, the gap between prices in London and most other regions will continue to widen,” states the report. “By 2018 we project the average price in London will be just below £600,000, some 3.5 times the average in Northern Ireland and more than 3.3 times the North East.”
