- London property prices fell by 1% year-on-year in the previous quarter.
- It is the weakest property market in the UK once again, in terms of price growth.
- “What began as a cooling of prices in the capital’s prime and super-prime postcodes is turning into an ever more widespread frost,” one analyst said.
- The fastest growing region was Northern Ireland, where prices increased by 7.9%.
Prices in the capital fell by 1% year-on-year in the previous quarter, Nationwide’s monthly survey of the market showed, once again making it the weakest of all the UK’s regions in terms of price growth, a position it has held since late 2017.
It was the only region to record negative price growth in Nationwide’s survey.
“London’s property market shows no sign of giving up its wooden spoon, as the slowdown in the capital worsens,” Jonathan Hopper, managing director of Garrington Property Finders said in a statement.
“What began as a cooling of prices in the capital’s prime and super-prime postcodes is turning into an ever more widespread frost.”
Property agents Savills reported earlier in the year that it is seeing price declines of as much as 4% in residential areas of South West London such as Battersea, Clapham, Wandsworth, Fulham, and Richmond.
The best performing region in the survey was Northern Ireland, where annual price growth accelerated from 2% to 7.9%. “Nonetheless, in contrast with other parts of the UK, price levels in the province are still well below their 2007 peak,” Nationwide said.
The reasons for London’s property price falls are many, but it largely boils down to three key issues. First, mortgages.
In 2014, the Bank of England introduced rules which ensured banks could only make 15% of mortgages on their books more than 4.5 times the borrower’s salary. That makes life particularly hard for buyers in London, where the affordability gap between salaries and house prices is biggest.
Second, Brexit. Negative sentiment around Britain’s EU exit appears to be holding buyers back from moving house and that, in turn, is hitting demand and driving down transaction volumes.
Finally, bloated prices, particularly for the higher end of the property market have been a feature of London for several years, but these prices are now falling, dragging down the rest of the market.
Things aren’t all bad for London prices, however, with Jonathan Hopper noting that “this is far from a frozen market.”
“The correction in prices helped buyer sentiment pick up a touch at the start of the year, and this has created a more free-flowing market as a steady stream of would-be buyers decide that it’s now or never,” he said.
Activity could also pick up ahead of an expected interest rate hike from the Bank of England in May, which will increase the price of borrowing.
“The prospect of interest rate rises – which could come as early as May – is also likely to provide an extra nudge to those who had been sitting on the fence,” Hopper said.