House prices fall in the capital

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Published: Tuesday 28th October 2014 by The News Editor

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London property values have fallen month-on-month for the first time in almost a year, fuelling expectations that the capital is set for a rapid slowdown in price growth generally.

Property prices in London fell by 0.7% month-on-month in September to reach £460,521 on average, marking the first monthly decline seen since October 2013, according to Land Registry data.

Some experts raised the possibility that the overall trend for a strong growth in values that has been seen in London could now start swinging back into reverse.

Properties in London are 18.4% more expensive than they were a year ago, although this marks a slowdown from a 20.8% year-on-year surge in prices recorded in the capital in August.

England and Wales as a whole saw a slightly less sharp monthly decrease in values in September than London. Across the country, prices dipped by 0.2% to reach £177,299 on average, although they were still 7.2% higher than a year ago.

Matthew Pointon, a property economist at Capital Economics, said “sky high” prices in London and a lack of homes to choose from have put potential buyers off.

He said: “That suggests price growth in London will slow rapidly from here.”

He also warned there is a “risk that prices in London could go into reverse”.

He said: “If house price expectations turn sharply negative, a glut of supply coming on to the market could push prices down.

“And if a mansion tax is introduced, prices in prime London are likely to take a hit.”

But he said: “A drop in prices is not our central view. House prices will be supported by a strong economic backdrop.”

The more subdued picture for London adds to a string of recent reports pointing to a cooling in the capital following a period of fierce price growth earlier this year.

Estate agent Foxtons recently reported a “sharp and recent slowing of volumes” in London property sales. Housing market experts have suggested that some buyers are displaying increasing caution towards prices amid expectations that interest rates will rise at some point next year.

Mortgage activity was also disrupted over the summer as lenders adjusted to new industry-wide rules which force them to probe mortgage applicants more deeply about their spending habits to make sure they can truly afford their payments.

In recent weeks there have been signs of lenders upping competition to attract mortgage applicants with cheap deals as they look to meet end-of-year targets.

The Land Registry figures showed that on a year-on-year basis, house price growth in London is still pulling way ahead of the rest of the country, with the East being the only other region to record a double-digit increase at 10.9%. The average house price in the East is £197,027.

All regions have seen growth in values over the last year, with Yorkshire and the Humber seeing the slowest annual growth at 1.4%, taking average property prices there to £119,184.

The volume of house sales taking place has been 18% stronger in recent months than over the same period in 2013, the Land Registry’s figures show. Some 75,950 sales took place each month on average between April and July this year.

The number of properties sold for more than £1 million in England and Wales in July was 19% higher than the same month a year ago. Some 1,439 million-pound-plus transactions took place in July this year.

Howard Archer, chief UK and European economist for IHS Global Insight, said: “With housing market activity clearly off its early-2014 highs, we suspect house prices will generally rise at a more restrained rate over the coming months.

“We see house prices rising by around 5% in 2015.”

Published: Tuesday 28th October 2014 by The News Editor

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