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House price divide set to widen

A sharp widening in the North-South divide for house prices in 2012 is being forecast by the Centre for Economics and Business Research.

A rise in London house prices of 2.4 per cent so far this year, compares with a fall in North East house prices of 2.7 per cent. A further, though less rapid widening is forecast for 2013 with London prices up 2.3 per cent and North East prices down 1.3 per cent.

Cebr believes the re-intensification of European financial turmoil in the last quarter has further boosted international demand in UK property, with wealthy investors seeking save havens for their assets.

It expects this investor demand, centred on prime markets in London and the South East, to help support marginal price growth over the year. Historically low interest rates and relative lack of housing supply are two more factors set to continue supporting property values.

Cebr chief executive Douglas McWilliams says: “Demand in the London market remains resilient, with the ongoing Eurozone drama piquing international interest in the capital.

“Furthermore, we can expect an abundance of affluent French citizens to be shopping for homes in London if President Hollande’s proposed 75 per cent top rate of income tax is enacted.”

Moreover, developments in the wider UK rental market are also forecasted to contribute to price growth over 2012. The latest data from the Office for National Statistics shows annual rent inflation has held steady at 3.1 per cent since the turn of the year. This is markedly quicker than earnings growth, and considerably above the pace of house price increases.

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