London prices fall as British property market cools

Decline for second straight month in British capital adds to signs that the property market is losing steam as a result of cooling measures

PUBLISHED : Wednesday, 23 July, 2014, 5:20am
UPDATED : Wednesday, 23 July, 2014, 5:20am

Asking prices for London property have fallen for a second consecutive month as a rise in the number of homes for sale softened the market for sellers, Rightmove said.

Prices sought in the British capital fell 0.4 per cent from last month to an average of £587,174 (HK$7.77 million), the property website operator said.

Across England and Wales, prices fell 0.8 per cent, their first decline since December last year.

The report adds to signs the property market is losing steam, after the Bank of England said it posed the greatest risk to the economic recovery. Financial stability officials set a cap on loan-income ratios last month to prevent surging prices leading to an excessive build-up of debt.

The declines were "a sign of some sellers asking beyond what buyers and lenders judge to be affordable or fair value", said Miles Shipside, a director at Rightmove. "Market conditions still compare favourably with this time last year, with growth in both the economy and employment, plus a comparative thaw in mortgage availability."

There seem to be more downside than upside risks to London housing
George Buckley, Deutsche Bank

The number of properties for sale in London is 15 per cent higher this year than a year ago, according to Rightmove. New sellers rose 28 per cent.

The decline in the capital was led by three districts - Islington, Wandsworth and Kingston - which each fell 3.8 per cent on the month. Nationally, of the 10 regions tracked by Rightmove, seven posted declines. These were led by 1.9 per cent falls in the East Midlands and the North.

Rightmove refined its forecast for this year's price growth to 8 per cent from a previous prediction of 6 to 8 per cent.

A stronger pound might also be deterring foreign buyers by making British assets more expensive, Rightmove said. The pound reached US$1.7192 on July 15, the highest since October 2008.

That point was echoed last week by Deutsche Bank economist George Buckley, who said the gains in sterling along with global economic weakness and the withdrawal of central bank stimulus might sap demand for homes in the capital.

"There seem to be more downside than upside risks to London housing going forward," Buckley said. "While we do not expect a crash in London property prices, we do expect price pressures to ease going forward and would not be surprised to see outright falls in asking prices."