House prices falling in two-fifths of London postcodes
New data on capital’s housing market show values under most pressure in the centre
House prices are falling in two out of five London postcodes, according to research that underlines the growing divergence between prices in southern English cities and those elsewhere in the UK.
The average annual rate of price growth in the capital has slowed to 1 per cent, down sharply from 4.3 per cent a year ago, meaning it is at its lowest level since August 2011, according to research by Hometrack, a housing market analyst. This stands in contrast to UK-wide average house price growth of 5.2 per cent in the year to February 2018, up from 4 per cent a year ago.
Richard Donnell, Hometrack research director, said that London — where the average price of a home is £487,900 — had experienced a number of “stages” in its housing market cycle. Following a period of “meteoric” house price rises, the capital has experienced an initial fall in transactions.
“This is part of a repricing process that is going to be drawn out,” he said. “First to react is turnover [the number of transactions]. Then it’s asking prices. Then finally it hits underlying prices.”
Prices are under greatest pressure in central London, where owners of the most expensive types of property began cutting prices in 2015 responding to the impact of higher taxes. In the past year, however, the trend has deepened in areas beyond the prime zones of Westminster and Kensington & Chelsea. The boroughs that saw the greatest drop in value were the City of London, Camden, Southwark, Islington and Wandsworth, according to Hometrack’s research.
The data included Greater London postcodes, as well as adjacent commuter areas such as Watford and Dartford.
Further disparities between sub-markets in the capital emerged when looking at “time to sell”. Property transactions in inner London are now taking nearly 18 weeks from start to finish on average, compared with about 11 weeks for outer London and commuter towns. Until early 2015, there had been no material difference on this measure.
Hometrack is predicting that the number of areas of the capital experiencing falling house prices will multiply during this year as trapped sellers reduce their asking prices to drive through transactions. “The net result will be a negative rate of headline price growth for London by the middle of 2018,” the research said.
As new regulations and tax rises have been introduced to constrain activity in the buy-to-let market and limit mortgage borrowing, speculative buyers have turned away from investing in London property. The loss of these discretionary buyers has left the capital more reliant on domestic UK buyers — but the latter face affordability pressures under tighter lending constraints and high prices.
Outside southern England, house prices are more likely to be rising, in some places at a substantial pace. Edinburgh, Liverpool, Leicester, Birmingham and Manchester are adding more than 7 per cent a year to their average house price, Hometrack found, with Leeds, Nottingham and Sheffield pegging rises of 6 per cent or more.
The laggards in the 20-city index were Aberdeen (down by 7.7 per cent), Cambridge (down by 1.5 per cent) and Oxford (up by just 0.5 per cent). “Cambridge is performing like an extension of the London housing market,” Hometrack said.