London's property market slows down after red-hot year

Average asking prices off the boil, but market is expected to keep rising at a steady clip this year and next as economy continues to rebound

PUBLISHED : Wednesday, 22 January, 2014, 4:34am
UPDATED : Wednesday, 22 January, 2014, 4:34am

London house-price growth is slowing after the best year since 2006, with values sliding in the most expensive districts of Westminster and Kensington and Chelsea.

Average asking prices in the capital this month have increased 0.2 per cent to £514,704 (HK$6.55 million), after growing 10.6 per cent last year, the operator of property website Rightmove said. Values in Westminster slid 8.3 per cent, while Kensington dropped 6.9 per cent.

"The average asking price of property coming to market is having a pause after a pretty hectic year of heady rises," said Miles Shipside, a director at Rightmove in London. "It's traditionally a quieter time of year. London needs more properties for sale to lessen upward price pressure."

London is leading the market as supply fails to keep up with demand and the capital's economy powers British expansion.

Bank of England governor Mark Carney predicted last week that housing would continue to strengthen this year, and while policymakers have downplayed concern that prices could spiral, they scaled back a mortgage lending programme last year.

Capital Economics predicts London's economy will expand 4 per cent this year and next. It has projected a 3 per cent annual increase in UK gross domestic product in the same period.

"London almost certainly led the UK's growth rate in 2013," said Richard Holt, an economist at Capital Economics. "We project that to continue this year and next, with several of the UK's more northern or peripheral regions and nations bringing up the rear."

Rightmove's isn't the only report to show London leading the property market. Data from the Office for National Statistics last week showed that British annual house-price growth was 5.4 per cent in November, compared with 11.6 per cent in the capital. Excluding London and the southeast, average prices in the UK rose 3.1 per cent.

Unsurprisingly, London has Britain's most expensive properties, with the average value in Kensington £2.05 million this month, according to Rightmove. That's more than eight times the national average of £243,861. In Westminster, homeowners are looking for around £1.39 million for their properties.

Nationally, values have climbed 1 per cent this month, with Yorkshire and Humber increasing 4.5 per cent. Prices in the north declined 1 per cent.

From a year earlier, UK asking prices for homes have risen 6.3 per cent this month, the highest annual rate of increase since November 2007. London's values increased 7 per cent in the same period.