London House Prices Surpass 500,000 Pounds for the First Time

(Bloomberg) -- The average home in London climbed above 500,000 pounds ($685,000) for the first time, bringing cheer to homeowners and piling on the misery for those increasingly priced out of the market.

Values in the U.K. capital were 9.7% higher in November than a year earlier, a surge matched only by Yorkshire and The Humber in northern England, according to Land Registry figures published by the Office for National Statistics on Wednesday. At 513,997 pounds on average, prices in London are now more than double the national level.

The increase coincided with the coronavirus crisis, which plunged the economy into its deepest slump in three centuries. That has widened the gulf between young people unable to afford the down payment on a home and older generations who have benefited from decades of rising values.

Driving the surge this year were factors including pent-up demand following the first national lockdown in the spring and a tax cut on homebuying worth as much as 15,000 pounds. The stamp-duty holiday, which began in July, is due to expire at the end of March.

Prices in inner London grew more quickly than those in outer boroughs. Kensington and Chelsea -- the U.K.’s most expensive district -- and Brent both recorded increases of more 20%. That’s despite increasing number of city dwellers moving out to places with more green space in response to the pandemic and changing work patterns.

“Demand for property in inner London may be particularly responsive to temporary property tax changes as property prices are high and therefore so is the corresponding tax to be paid,” the ONS said. “In addition, compared with other regions of the U.K., London has a relatively high proportion of properties bought for investment, including from cash buyers and overseas investors.”

Demand for inner London may increase further in the short term as nonresidents seek to snap up property ahead of a property-tax increase set to be introduced in April. A new route to U.K. citizenship for British Nationals Overseas in Hong Kong may also fuel demand, the ONS said.

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