London house prices have fallen for the first time in eight years, according to the latest quarterly Nationwide house price index. With a 0.6% fall on the same quarter of 2016, London thus became the weakest performing region in the UK for the first time since 2005.
The annual rate of house price growth remained broadly stable in September at 2.0%, compared with 2.1% in August.
Robert Gardner, Nationwide's chief economist, told capital.com: “We are not really surprised that London has underperformed. Affordability metrics are more stretched than in other parts of the country as prices in the capital had been outpacing the rest of the country for a sustained period.”
Robert Gardner, courtesy of Nationwide
“For example, compared to pre-crisis levels, London prices are 55% above their 2007 level compared with just 14% in the UK overall, while in Wales, Scotland and parts of northern England they are still around 5% lower.
“A property in London will cost the average first-time buyer almost 12 times average earnings compared to four and a half to five times in, say, Scotland and Wales.
He also points to recent changes in the buy-to-let sector which affect property in London more than elsewhere in the UK as the rental market is so important in the UK capital (of which more below).
Looking ahead problematic
Looking ahead is, as always, problematic. “It is very hard to see what will happen going forward,” he says. “We believe London prices will rise more slowly than in the rest of the UK because of the affordability metrics.”
“Housing market activity, as measured by the number of housing transactions and mortgage approvals, has strengthened a little in recent months, though remains relatively subdued by historic standards,” he says in the official press release detailing the figures.
“Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appear to be weighing on confidence. The lack of homes on the market is providing ongoing support to prices.”
Nationwide House, courtesy of Nationwide
Russell Quirk, Founder and CEO of hybrid estate agent eMoov.co.uk, commented that London’s stall in growth during September is likely a continued ripple effect from the summer holidays as schools opened their doors and potential homebuyers were getting back into a routine with family.
“There are optimistic signs that the resilient London market will catch up to the rest of the UK in the coming months,” he says.
Russell Quirk, courtesy of eMoov.co.uk
The Nationwide figures broadly echo those in the Halifax House Price Index issued on 7 September. The Halifax index showed house prices in the last three months (June-August) were 0.1% higher than in the previous three months (March-May).
Prices in the three months to August were 2.6% higher than in the same three months a year earlier. The annual rate in August was higher than in July (2.1%). This however has fallen from a peak of 10.0% in March 2016 when transactions grew sharply ahead of the introduction of new higher stamp duty tax rates for buy-to-let and second homes that came into effect in April that year.
London drag continues
Rightmove.co.uk, the UK's favourite web-based property search engine, said in its September prices bulletin that there is no sign of the usual autumn price bounce as what it calls the London drag continues.