London house prices see sharpest fall in eight years

London house prices posted their largest annual drop in almost eight years in April as buyers shunned the British capital’s central areas.

The average asking price in the city fell 1.5 per cent to £636,777 (US$813,000) from April last year, the largest annual decline since May 2009, property website Rightmove said. On the month, asking prices decreased 2 per cent.

London’s housing market has underperformed the rest of the country since the start of 2016 after demand was hit by unaffordable valuations, the Brexit vote and tax increases on investors. 

More expensive homes are suffering the most as the city’s inner areas posted a 4.2 per cent annual decline, while prices in cheaper outer suburbs were up 1.7 per cent.

“While the rest of the country enjoys a spring surge with most regions seeing a price boom and new price records, some parts of the London market are still readjusting,” Rightmove director Miles Shipside said. “The more discretionary upper end of the market is having to tempt buyers with cheaper asking prices, offsetting the higher purchase taxes.”

For the country as a whole, prices rose 1.1 per cent on the month, Rightmove said. That was still slower than the average monthly gain of 1.6 per cent seen at this time of year over the past seven years. The national annual increase of 2.2 per cent was the weakest since April 2013.

The loss of momentum may signal that buyers are becoming more cautious as accelerating inflation erodes real earnings and the start of the formal process of Britain leaving the European Union clouds the economic outlook.

A separate report from Deloitte showed consumer confidence fell in the first quarter. The survey of 3,000 Britons was carried out between March 17 and 20.