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Does your house earn more than you?

Tuesday, 17th June 2014

Categories: Market Analysis Property Prices

Author: Kris White

London homeowners might be tempted to give up the nine-to-five slog and sit at home with their feet up, if the latest findings from the Office of National Statistics are anything to by. Research reveals that over the course of the last year, the average London house earned more than its owner, piling on an incredible £63,000 in value. With the daily commute beset with strikes, delays and the prospect of journey squashed into a sweaty train carriage, those who have been fortunate enough to break into the property market before the recent stratospheric rises might well consider a life of daytime telly and gardening while their house does all the hard work.

Watching the bubble

However, homeowners shouldn’t become too complacent about sitting on a potential goldmine. There are constant rumblings in the background about the bubble bursting, and while no one can predict the exact path of London’s quite unique property market, it’s fair to say that such increases are unsustainable over the long term. Even if the crash forecast by doom-mongers doesn’t materialise, there will inevitably be a certain amount of levelling out, as potential buyers fail to keep up with the disproportionate increases in house prices.

Cautious celebration

House equity is not quite the same as money in the bank, especially if you purchased your property in the last few years. With fees and moving costs taken into account, it would be wise to sit pretty and keep an eye on the market before celebrating the new market value of your house. It could be a dangerous move to draw down too heavily on equity at this stage. On the flipside, if you’re planning to move out of London and have watched with interest as buyers in your area have paid increasingly higher amounts for properties similar to yours, now could be the time to capitalise on the current market and maximise your profit for your next move.

Supply and demand has also skewed valuations to a certain extent, with desperate buyers prepared to pay well over the odds for a limited stock of properties. That means that if you’re looking to move locally, or within London, you will be in exactly the same situation as your buyers – and will need to be prepared to pay more for your next property, if it’s in a particularly desirable location.

As we all sit and wait for the next instalment of the London property saga, at least we know that our house are paying their way and our investments have been worthwhile.