London house prices have seen the smallest rise in nearly seven years and are set to start declining this summer as already two fifths of the capital’s postcodes are recording price falls, new data show.
Property prices in the UK capital climbed by 1 per cent in the year to February, down from 4.3 per cent a year ago and the smallest increase since August 2011.
Hometrack said the decline in the capital was due to a mix of Brexit uncertainty, tax changes for property investors and stretched affordability after years of steep price rises.
House price falls: The London’s postcode of Camden saw the second biggest price fall in the capital at 1.9% after the City of London, where prices fell by 7.9%
It also noted how the proportion of boroughs recording declines (a 42 per cent) was at its the highest since the financial crisis.
But despite London’s falls, house price inflation across the UK’s top cities accelerated to 5.2 per cent from 4 per cent a year ago, driven by strong growth in regional cities outside southern England.
Edinburgh, Liverpool, Leicester, Birmingham and Manchester all recorded price inflation of over 7 per cent, as opposed to cities like London, Bristol and Southampton, which have seen growth slow down.
Hometrack said that half of the 20 UK’s top cities saw prices grow faster than last year, while the other 10 saw house price inflation ease.
10 cities saw prices grow faster than last year, while the other 10 saw house price inflation ease
Bristol recorded house price growth of 4.1 per cent, compared to 7.7 per cent in February last year. Similarly, Southampton slowed from 5.8 per cent to 2.8 per cent.
Cambridge and Aberdeen were the only two cities to see prices fall – with Cambridge sort of following in the footsteps of the London housing market – although Hometrack expects more cities to begin seeing prices to fall.
Slowdown: London house price inflation was just 1% last month and Hometrack said it expects the capital to see prices fall from mid-2018
‘We expect the balance of markets registering price falls to increase over 2018 as prices continue to adjust to what buyers are prepared to pay,’ said Richard Donnell, insight director at Hometrack.
In London, house prices continued to increase in 58 per cent of postcodes, but this proportion has shrunk over the past two years and if the current trend continues, the rate of headline growth in the capital is set to turn negative from mid-2018.
Hometrack’s UK Cities house price index
‘The weakness in London’s housing market has been building since 2015 on the back of numerous tax changes aimed at overseas and UK investors and growing affordability pressures facing home owners,’ Donnell added.
‘Sales volumes are first to be hit when demand weakens and housing turnover across London is down 17 per cent since 2014. Sales prices are next to follow but with few forced sellers the level of price falls remains low.’
The slowdown in the capital is mainly driven by price falls across inner London postcodes, with now fifteen of the 46 local authorities that make up the London index, or 42 per cent, experiencing price falls.
Hometrack said this was the highest proportion since the financial crisis.
The biggest price falls in London were in the City of London, where prices fell 7.9 per cent, followed by Camden, where prices fell 1.9 per cent in the year to February, Southwark, with prices down 1.8 per cent and Islington, where prices dropped 1.4 per cent.
But in spite of the slowdown, average London house prices are still up a whopping 86 per cent compared to 2009 levels, Hometrack said.
‘Away from southern England house price growth remains robust in regional cities where prices have registered lower overall growth since 2009 and affordability levels are in line with their long run average,’ Donnell added.