Against a backdrop of rising house prices and a shortage of property, the first million pound towns outside of London hit the news recently. Data from Lloyds Bank revealed that locations such as Virginia Water in Surrey, Cobham (also in Surrey) and St Albans in Hertfordshire, all have average property prices which are in excess of £1 million.
However, the appetite for buying houses at that value has dropped. Lloyds also revealed that the number of million pound transactions has actually dropped by 11% in the first half of 2015. This contrasts sharply with the 46% increase that was seen in the first half of 2014.
So why has this happened?
There has been a significant slowdown in the prime and central London market of late and this, coupled with the effect of the new Stamp Duty rates introduced last December, has definitely contributed to the dip. We therefore find ourselves in a bit of a Catch 22 situation - there is an undersupply of property which is pushing up prices and creating million pound towns and generally, people don’t have the money to buy properties at that price so that’s why more and more people are turning to renting.
The situation in the rest of the UK
Whilst the rise of million pound towns is something that is happening largely in the London commuter belt, how is the rest of the UK faring?
Well, there’s undersupply just about everywhere and this is pushing up house prices pretty much across the board. According to the Centre of Economics and Business, UK property prices could soar by 25% over the next 5 years, making it even more difficult for first-time buyers to enter the market. It is forecasted that the average price of a property in the UK could reach £321,600 by 2020 which is £58,600 more than it is today. All of this points to a growing rental market that is set to continue for some time to come.