■ London leads the way: House price growth has been exceeding the rest of the country since the mid-noughties. Figures from the Nationwide show that London house prices are now more than double the UK level and much higher than in previous peaks in 1987 and 2001.

■ What next for London property values? Prices vary dramatically across the capital. Values in Kensington and Chelsea are now 134% above the 2005 level whereas those in Barking and Dagenham are just 10% above. Yet over the last 12 months, the biggest price growth has shifted from the centre to boroughs such as Waltham Forest, Lambeth and Southwark. This ripple effect suggests there is further potential for price rises in outer boroughs.

■ Affordability constraints will bite: With house prices in London now more than 10 times average income, we expect current levels of growth will slow. Our current forecast for the London mainstream market suggests house prices will rise by 24.4% over the next five years. This compares with growth forecast of 23.1% for prime central London. We expect to see most of the growth in mainstream markets in the short term. Affordability pressures, mortgage constraints and the eventual rise in interest rates is likely to slow the market in the medium term. However, our forecasts apply to the second hand market. New build values may not move at the same rate.

■ New build premiums: In London, most new developments exhibit a premium over existing second hand actual values. This may be for a number of reasons – higher quality of new stock, extra services and facilities provided not available in second hand and the wider reach of marketing.

■ Sustainable pricing is key: There is no uniformity when it comes to new build premiums, particularly in London. Sustainable price premiums are based on what both homeowners or renters will pay to live in alternative locations. In regeneration areas, this may differ significantly from the cost of surrounding second hand housing. However, the ultimate test is how prices compare with the cost of second hand housing in more established markets.

■ Importance of place: Emerging neighbourhoods and areas of regeneration carry the potential to drive occupier demand to new levels particularly if the degree of place improvement is great. However, there are risks to price premiums if speculative demand exceeds occupier demand.

■ Help to Buy: The equity loan part of the scheme aimed at buyers of new build, is playing a significant part in supporting the sales of new homes in lower value boroughs in London. In Barking & Dagenham the scheme is supporting 37.4% of all new build sales.

■ Transport improvements: The opening of the East London Line has had a lasting effect on premiums achieved in Peckham, Honor Oak and Norwood. Woolwich has benefited from Crossrail. Better infrastructure is an essential ingredient for creating sustainable value uplift. Further improvements such as Crossrail 1 and, if approved, Crossrail 2, have the potential to open up new markets.

Taken from
Spotlight: London Regeneration - Boosting housing supply beyond prime