London sees first home price drop since 2009

A decrease in London house prices for the first time since 2009 has been hailed as a good sign, potentially relieving some pressure. Meanwhile, the rest of the country continues ‘ticking along’.

Apartment building in Kensington, London
House prices in London are seeing their first year-on-year decline in eight years, according to the latest index from the Nationwide Building Society.

London only location to see fall in house prices in third quarter

With prices recording a 0.6 per cent fall, the capital was the only area of the UK to see an annual price decline in the third quarter of 2017, according to the index. It was the first time since 2009 that London had seen an annual fall, although at £471,761, average home prices there remained far above anywhere else in the country.The biggest percentage rises over the year were seen in the East Midlands, SW England and the West Midlands. Across the country as a whole, average prices rose two per cent.Robert Gardner, Nationwide’s chief economist, said, “House price growth rates across the UK have converged in recent quarters. Annual growth rates in the south of England have moderated towards those prevailing in the rest of the country.“London has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years, albeit by a modest 0.6 per cent. Consequently, London was the weakest-performing region for the first time since 2005.”Mr Gardner said that, despite this year’s slowdown in house price inflation, a resilient economy, low unemployment and record low mortgage rates should prevent the market from suffering major declines.“Housing market activity, as measured by the number of housing transactions and mortgage approvals, has strengthened a little in recent months, though remains relatively subdued by historic standards.“Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appear to be weighing on confidence.“The lack of homes on the market is providing ongoing support to prices. House price growth rates across the UK have converged in recent quarters. Annual growth rates in the south of England have moderated towards those prevailing in the rest of the country.”
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Alex Gosling, CEO of online estate agents, commented, “The London property market has enjoyed almost a decade of phenomenal growth. But year after year of double digit growth was unsustainable and inevitably going to come to an end at some point. That point looks like now.“The government’s reform of the stamp duty bands and the introduction of a second home stamp duty surcharge have hit the London housing market more than any other region.“Brexit fears are also scaring off overseas investors who came to the rescue and supported the London market during the dark years after the financial crash.“Many Londoners will actually be hoping that house prices continue to fall until they reach an affordable level. Their wish may well come true.”Alastair McKee, director of independent mortgage broker, One 77 Mortgages, added, “Borrowers have been very savvy over the past year or so, locking into fixed rates as a way to protect themselves when rates finally do begin the long ascent upwards.“Despite the fact that they’re more expensive than their two-year counterparts, five-year fixes have become increasingly popular as they provide even greater protection. There’s a growing sense among buyers and home-owners that the great interest rate party is coming to an end.”

Drop in London prices potentially positive

Lee James Pendleton, founder director of independent estate agents James Pendleton, said, “The bellwether has turned but it’s a really positive thing because it’s going to get the market moving. London has been the torchbearer of quite unbelievable growth in recent years but it has been an overvalued market for at least the last three years.“The most surprising thing of all is how the capital managed to keep up its march skyward for so long. There have been so many headwinds but an era of cheap borrowing has seen buyers refuse to be intimidated. That period of bravado now seems to have come to an end as the capital’s fortunes diverge from those of every other region.”Jonathan Samuels, CEO of the property lender Octane Capital, said, “The London property market has been the victim of its own extraordinary success. For the broader market, low supply, strong employment and low borrowing costs are keeping things ticking along, although high inflation and the possibility of the first rate rise for a decade remain a threat.“Even though the likely quarter per cent increase would not be a game-changer, the fact that it represents the beginning of the interest rate upcycle is a major psychological development.”Nicholas Finn, executive director of Garrington Property Finders, said, “Of course, the capital’s gravity-defying, double-digit rates of annual price growth were always going to be unsustainable.“The softening of prices was initially led by the capital¹s prime market, which was knocked sideways both by Brexit and in the wake of the introduction of higher rates of stamp duty for high-value homes.“But it is now spreading from the central boroughs ­ which saw prices rise fastest during the boom ­ to other areas where the growth came later. As a result the market is at an inflection point, as the froth evaporates and prices gently correct to more realistic levels.”Average prices and annual change in the third quarter of 2017:East Midlands - £177,825, 5.1 per centSouth West - £240,832, 4.8 per centWest Midlands - £183,018, 4.6 per centOuter South East - £277,519, 3.9 per centEast Anglia - £222,080, 3.9 per centNorth West - £156,193, 2.8 per centWales - £149,970, 2.6 per centNorth East - £127,213, 2.5 per centNorthern Ireland - £133,659, 2.4 per centOuter Metropolitan - £365,584, 2.1 per centScotland - £146,022, 1.9 per centYorkshire and the Humber - £151,482, 0.4 per centLondon - £471,761, minus, 0.6 per centFor related news and features, visit our Residential Property section.Access hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online Directory  Get access to our free Global Mobility Toolkit Global Mobility Toolkit download factsheets resource centre

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