Asking prices for London homes fall by most since 2009, but overall UK market remains robust

The prices that sellers of London homes are seeking for their properties fell by the most since the financial crisis this month, at a time when prices in most of the rest of Britain are rising, industry figures showed on Monday.

London’s once red-hot housing market has slowed for the past year due to a double hit from higher purchase taxes on expensive homes and the June 2016 Brexit vote, which hurt demand from foreign buyers and raised fears of big job losses in the capital’s financial industry.

Rightmove, Britain’s biggest property website, said the average asking price for a home in London this month was £600,926 (US$826,094), 3.5 per cent lower than a year before and the biggest drop since June 2009.

Most of the rest of Britain saw year-on-year increases in asking prices of 4 per cent or more, and the average asking price in Britain was just under £300,000.

“Early indicators of activity in this year’s housing market show that demand remains robust,” Rightmove said.

There have been other signs of a slowing in London’s housing market. Mortgage lender Nationwide said earlier this month that prices in the capital fell by 0.5 per cent in 2017, their first full-year fall since 2009.

However, home ownership remains out of reach for many would-be buyers in London. Initial mortgage repayments for a typical first home in the city represent more than 60 per cent of average take-home pay, double the proportion elsewhere in Britain. And a 10 per cent deposit can easily require more than a year’s salary in savings – or help from richer family members.

Rightmove said finance minister Philip Hammond’s decision in November to scrap purchase taxes for most first-time buyers, along with a shortage of homes to buy, helped to offset the drag from slow wage growth and an uncertain political outlook.

Unlike some other indicators, Rightmove’s data showed prices fell most in inner London suburbs, where they were 7 per cent lower than a year ago, rather than the prime central London areas favoured by many super-rich international buyers. Prices were little changed in central London and outer suburbs.

Separate data from property group LSL Property Services gave a similar picture for December, though national price growth was more subdued than in Rightmove’s figures. LSL showed price falls in London were steepest in central boroughs.

LSL said the gap between price trends in London and the rest of Britain was the widest in three years.

“London is largely out of step with the rest of England and Wales, where the market remains broadly positive,” LSL said.

Rents showed the opposite pattern. Property agents Countrywide said London recorded the biggest rise in rents for new tenants in England, up 3.2 per cent on year in December and only just pipped by increases in Scotland. Outside London, rents increased by an average of 2.0 per cent.