It’s official, London’s house prices have recorded their first annual fall in almost a decade, according to government records. The figures also show increases in every other region of the country.
In the latest of many signs that the capital’s property market is slowing, the report from the Office of National Statistics (ONS) shows that the average price of a home in London fell by around £5,000 during the 12 months up to February 2018.
Average Cost Down
While prices have risen in some areas of the capital, Tower Hamlets recorded the steepest fall with average prices down by approximately 8%. The average cost of a home in London as a whole was at £471,986, a figure that has fallen from its peak of £488,247 in July 2017.
For the UK overall, the growth rate slowed to 4.4% in the 12 months up to February, after rising at an annual rate of 4.7% a month before. While London’s prices dropped by 1% over the time recorded, other regions gained. Scotland and the Midlands saw property values rise by more than 6%.
The ever-changing fortunes of London’s property market, and for the country as a whole, show the impact of the uncertainty surrounding Brexit, as well as increases on Stamp Duty. The latter has made buying a property more expensive than it was ten years ago. This leads to people buying and staying for longer, which in turn lowers transaction volumes.
Transaction Numbers Fall
Before the financial crisis kicked in during 2008/2009, there were approximately 1.6 million property transactions every year. This has dropped to 1 million per year since 2014.
This change in behaviour leading to people moving less has effectively slowed activity in the property market. First-time buyers could also see it as hopeful as London’s property could become more affordable.
Although house prices in London are still out of reach for most people on average wages, homes in other regions are more affordable. The north-east continues to offer the lowest average price of £128,000, while the average national price is £225,000.
Of course, these prices are rising from a much lower base outside of south east and London, although they took much longer to recover from the financial crisis. However, the shortage of houses in every region of the country could push prices up more over the next few years.
Annual growth is likely to continue to be subdued over the next few years, and we can expect to see London prices fall by 3% over 2018 and up to 5% next year.
About Samir Salya
Samir Salya is the Chairman of Reign Holdings and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.