A growing number of housebuilders want to construct new homes in London, while increasingly ignoring other parts of the country, because prospects for price growth are far greater in the capital.
Fresh research from CBRE shows that new home developers are now focussing on London and the proportion of housing starts in the capital has increased from under 9% to over 13% in the past four years, despite private starts falling nationally since mid-2010.
CBRE report that the average price of a home in the UK has increased by a total of 24% in the past five years. However, this figure falls to 6% if London is excluded from the study, illustrating the fact that the gap between prices in London and the rest of the UK is widening.
Furthermore, London property sales are making up an increasing share of the market, with sales of apartments in the capital accounting for 38% of the total number of sales across the UK, which explains why more housebuilders want to develop new homes in London.
Jennet Siebrits, head of residential research, CBRE, said: "It really is a game of two markets at present with London relatively buoyant compared with the rest of the UK. Over the last 15 years, the price differential for apartments in London has increased from 50 to 100% which means that house prices in the capital are now double that of the national average.
"Overall the UK housing market remains weak but broadly stable. However, risks and uncertainties are increasing as the eurozone sovereign debt crisis impairs the general economic outlook. There are signs that credit availability is improving with the number of mortgage deals almost double the 1,600 figure of early 2010; banks are uncertain about who is exposed to eurozone sovereign risk and this could affect their willingness to lend to each other."