A big drop in the amount of property for sale has driven up prices by nearly 10% in central London already this year, a leading agent has said.
Douglas & Gordon said supply is down by 30% on this time last year, while demand has remained unchanged.
Chairman Michael Hodgson said: “We are half way through the year and capital values in D&G land have already risen 9.6%. Indeed, the last quarter saw the strongest quarterly growth in central London for nearly four years with a 5.4% increase.
“So with falls unlikely, we have undercooked our prediction of an 8% increase in capital values in 2013. We may have egg on our face, but not as much as some of our illustrious competitors who predicted a 1% fall or a 0.5% increase.”
The drought is also confirmed in a new report by the website Home, which said that in the first six months of this year, almost 65,500 homes across the whole of London were put on the market. Three years ago the figure was 87,400.
Looking back further, over the last six years supply has contracted by 67% in the Greater London area.
Last month, in June, supply contracted to under 10,500 homes – 40% down on three years ago.
Doug Shephard, director at Home, said: “Home price rises in and around London seem to be relentless. Affordability issues for equity holders, let alone first-time buyers, are growing and hinder attempts to move.
“Consequently, the capital finds itself in a bizarre situation: market prices are showing signs of overheating but, despite this, they are being further inflated by the severe drought in property stock – the characteristics of a classic investment bubble.”