In-depth analysis of September’s Land Registry HPI data from residential investment experts, London Central Portfolio (LCP) has shown that fears of a national house price bubble have been wildly premature. Whilst the Government’s data has highlighted a negligible fall of 0.2% in prices for England and Wales in September, the first fall in six months, the statistics actually understate the truly gloomy picture for the national housing market.

Average prices reached £177,299 last month, still 2% below their pre-credit crunch levels. However, LCP show that the figures are artificially boosted by price growth in Greater London. Removing London, average prices are just £133,538, based on average transactions for the year to date. This is only just above the 1% stamp duty threshold and a whole 16% lower than December 2007, when average prices were £158,494. In reality, outside the capital, average house prices have only just got back to where they were 10 years ago.

Naomi Heaton, CEO of London Central Portfolio, comments: “These figures suggest that housing stock outside Greater London is still affordable. The slow recovery indicates that positive economic sentiment and the ‘feel-good-factor’ are still missing. The Bank of England’s cooling measures and the threat of interest rate rises are also taking their toll. The furore about a house price bubble over recent months has been totally unhelpful. It is simply not justified outside London and inhibits buying activity, closing the door to first time buyers.”

The company’s research has shown that price growth over the last year has been just 3.1%, well below peak levels and the average growth rate of 9.4% seen between 2000 and 2008 which reflected the recovery after the price doldrums of the 1990’s.

Heaton adds ‘Few, if any, commentators reported a bubble then, (2000-2008) suggesting that house price rises were welcomed after the downturn and taken for granted in a dynamic economy. Despite the exceptionally high growth, no artificial measures were put in place to curb house prices and the market found its own level, with growth starting to slow from 2005.”

LCP has projected that, at the current annual growth rate of 3.1%, it will take another 5 years for prices to even catch up with their pre-credit crunch level.

Heaton concludes: “Residential property prices in the UK move in cycles. Periods of growth are generally followed by periods of consolidation. We should expect to be entering a new growth cycle given prices are only at the same level as 10 years ago and are, without doubt, suppressed currently. They will inevitably start moving rapidly when sentiment improves and there is clarity over interest rates. This should be welcomed as a sign of economic confidence, not a harbinger of disaster.”