London homes face biggest price drop in 6 years

Home sellers slash asking rates as market in British capital endures steep summer slump

PUBLISHED : Wednesday, 20 August, 2014, 5:21am
UPDATED : Wednesday, 20 August, 2014, 5:21am

London home sellers cut asking prices by the most in more than six years this month, adding to signs the property market in Britain's capital is coming off the boil.

London values fell 5.9 per cent from July to an average £552,783 (HK$7.15 million), the biggest drop since December 2007, property website Rightmove said on Monday.

Nationally, prices declined 2.9 per cent, a record for an August.

While property demand usually weakens during the summer, Rightmove said the slump this year was steeper than it expected.

Tougher new mortgage rules introduced by Bank of England governor Mark Carney, as well as anticipation of higher interest rates, are putting pressure on the market after a surge in values raised concerns that a bubble may develop.

"Buyers and sellers are becoming increasingly aware about personal finances, given that the cost of mortgages are going up and regulators are trying to bring availability down," said Miles Shipside, a director at Rightmove. "This limits what buyers are willing or able to pay, and helps moderate sellers' price expectations."

Some of the biggest price declines in London were recorded in affluent boroughs including Kensington and Chelsea, Camden, and Hammersmith and Fulham, according to the report.

Among the "million-pound-plus" districts, Kensington saw asking prices drop 7 per cent on the month to an average £2.2 million, while Camden fell 7.2 per cent. From a year earlier, values in Kensington were down 1.4 per cent, the only borough recording an annual decline. The average London price is up 10.3 per cent in that period.

"Top-end sellers are very much discretionary ones, so can delay marketing till a more active time of year," Shipside said. "That tends to depress property prices more in the higher-priced boroughs."

Nationally, the annual pace of growth in prices slowed to 5.3 per cent from 6.5 per cent in July. The average asking price was £262,401. Rightmove said the drop in monthly prices was a "lead indicator of a slower market in the second half".