Market News

London House Prices Record the First Annual Drop Since 2019 - BLOOMBERG

AUGUST 16, 2023

BY  Lucy White and Eamon Akil FarhatBloomberg News

, Source: Office for National Statistics

(Bloomberg) -- London house prices have fallen year-on-year for the first time since 2019, according to official data that may indicate a broader slump in the property market is gathering pace.

The cost of an average home in the capital slid 0.6% to £528,000 ($672,780) in the year through June, figures from the Office for National Statistics showed. The last time London prices dropped was in November 2019, by 1.2%. It’s the first time that any of the English regions have seen a contraction since May 2020.

The decline in London indicates that soaring interest rates are starting to weigh on activity, as buyers in the capital tend to borrow more relative to their incomes than in the rest of the country. Economists have warned that prices nationwide may slump 10% this year.

The official data is based on completed transactions recorded at the Land Registry and has shown UK house prices to be surprisingly resilient so far, falling just 1.8% from the peak in November. That data lags by several months the findings of mortgage lenders Nationwide and Halifax, which have seen sharper declines base on the loans they’re writing, and the property portal Rightmove, which assesses the asking prices of sellers.

London property prices are still well above where they were pre-pandemic. They’ve fallen 2.9% from their peak in September 2022. The ONS said the fall was mainly due to base effects — while the average price of a London home increased by £3,000 between May and June, there was a larger increase of £9,000 a year earlier. 

This may be an indication that house prices across the UK could soon start falling too as base effects come into play, since they peaked later in the year. The national average house price hit £288,000, which is £5,000 higher than a year ago but also £5,000 below the recent peak in November 2022.

Yet in a sign that the market may be stabilizing, the average UK house price climbed by 0.3% month-on-month in June following a decrease of the same amount in May, figures from the ONS showed.

“The housing market remains strong for both buyers and sellers,” said Nathan Emerson, chief executive of professional body Propertymark. “Sellers are making a gain on their property price compared to this time last year, and buyers are still able to negotiate to find a middle ground.”

London was the only region to see a year-on-year fall in house prices, though properties in the capital are still far more expensive than anywhere else, at an average of £528,000. In the North East, prices are 4.7% higher than a year ago.

The number of transactions recorded, at 85,870, did indicate some weakening in activity. There were 15% fewer deals than a year ago, but the number was still 6% higher than in May.

A heated rental market 

Private rental prices paid by tenants were up 5.3% in the year to July, according to the ONS, up from 5.2% a month earlier. This was the largest annual change since data began in 2016. In London, rents shot up by a record 5.5% — a rise also seen in the West Midlands and Yorkshire and the Humber. 

The increase in rents recorded by the ONS has been less steep than by some other private companies, as the official data looks at the entire stock of rented housing rather than just new lets. 

But it still points to a rental market where supply is failing to meet demand, especially as landlords threaten to leave the market due to rising mortgage costs. 

In separate inflation data from the ONS on Wednesday, it emerged actual rents across all homes were up 1.7% between June and July compared to 0.8% the same time a year ago.

This was driven by a rise in social landlords rents rather than private rents, the ONS said.


(Updates from first paragraph to focus on London.)


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