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Feb 3, 2014|
A newly released report shows that London's housing market seems to be going into a price bubble as property prices soar in comparison with earnings.
According to the report released on Monday by the UK-based economic forecasting group EY Item Club, the average house price in the capital will rise to £600,000 ($978,360) by 2018.
The price is 3.5 times more than the average in Northern Ireland and 3.3 times more than the average in the northeast of England.
"London, which is suffering from a combination of strong demand and a lack of supply, is increasingly giving us cause for concern," said Andrew Goodwin, senior economic advisor to the EY Item Club.He also added that the UK Government’s Help to Buy scheme, which is aimed at helping people buy their own house, “has only a very limited impact on the capital and withdrawing it could risk choking off the recovery in housing transactions across the rest of the UK, without solving any of London’s issues.”
Based on a recent survey by the Land Registry agency, house prices in London have risen at more than double the rate of the rest of the UK to an average of £403,792 ($658,423).
The government has sought to kick-start the UK housing market with the Help to Buy scheme.
However, critics say that approach is misleading. Capping housing benefits without regulating rents has led to more families getting into financial trouble.
As the government debates ways of reigniting the housing market in an attempt to stimulate economic recovery, those simply looking for an affordable way of keeping a roof over their heads might have a tough journey ahead.