London house prices to rise by 20 per cent in five years
London house prices are today forecast to rise by almost a fifth over the next five years, outstripping every other region of the country.
The capital's property market is expected to remain the most resilient in Britain with the biggest rises seen in the most sought after central London neighbourhoods where they could go up by as much as 23 per cent.
The forecasts, from agents Savills, mean that a £500,000 London family house could be worth close to £600,000 by 2016.
Prices are expected to rise much more slowly or even fall outside London, a trend that is deterring thousands of families from making the move to the countryside.
Yolande Barnes, director of Savills residential research, said: "Despite the widening gap between London and the country, Londoners seem increasingly reluctant to move out and there has been a 24 per cent drop in such relocation activity, meaning that values in the South-East are still 12.5 per cent below peak and will only turn upwards as the economy begins to recover." Prices are likely to fall slightly next year because of the pressure on family budgets caused by high inflation and low wage increases, before a slow recovery in 2013.
By 2015 they are expected to rise by six per cent a year. The Savills research suggests that the days of making huge profits from London property are over for the foreseeable future. The expected cumulative 19.1 per cent rise in values in London by 2016 is only two per cent ahead of inflation.
Until the 2008 financial crisis triggered a crash, property values had been rising at an average of 2.5 per cent above inflation for decades.
However, Lucian Cook, director of Savills residential research, said: "We certainly do not believe the trend of inflation-busting house price growth has been consigned to history. By the end of 1995, inflation-adjusted house prices were at the same level as they were 12 years previously. In the following decade they rose by 140 per cent."
Within London, growth is expected to be fastest in the prime central "bullseye" of Westminster and Kensington & Chelsea. Ms Barnes said she could see no signs of let-up in foreign demand for trophy London homes and estimated that £6 billion has flowed into the central London property market from abroad over the past 18 months.
She added: "We believe the influx of foreign wealth in uncertain times still has some time to run and it may even be boosted by the international attention focused by the Olympics."
The average price of properties sold in Westminster has smashed the £1 million mark for the first time.
It becomes the second borough in London where average prices are measured in seven figures, following Kensington and Chelsea.