London is still the most expensive region in the UK for house prices – unsurprisingly.
However, the latest data from Nationwide shows that it is also the weakest performing region, as properties across the country rise at a faster rate than those in the capital.
But what does that mean for existing home owners and first time buyers, and why is it happening?
London housing market weakens
According to the data, the average London house price between July and September was £471,761, which shows a 0.6% drop compared to the same period in 2016.
This report marks the first time London has been the weakest region since 2005 and means that property prices in the city are the lowest they have been since 2009.
Robert Gardner, Chief economist at Nationwide, said of the findings:
“Housing market activity, as measured by the number of housing transactions and mortgage approvals, has strengthened a little in recent months, though remains relatively subdued by historic standards.
“Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appear to be weighing on confidence. The lack of homes on the market is providing ongoing support to prices.
“London has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years, albeit by a modest 0.6 per cent.”
Why is house price growth slowing?
There are many reasons being given for the fall in house prices and the slowing market growth, including:
- Brexit: Of course, uncertainty is still rife around the consequences of Britain leaving the European Union. The housing market is suffering due to potential buyers being unsure of what the next few years have in store and are holding off on making property purchases as a result.
- Predicted interest rate rises: The Bank of England have been heavily implying that they will soon raise interest prices for the first time in ten years. This may lead to potential buyers shying away from making new commitments, due to the higher mortgage rates and higher costs. Less buyers push prices down.
- A market need: A widely-held opinion is that London’s house prices have been rising so rapidly, and for so long, that a drop has been expected for some time. The increases over the past decade have seen new buyers priced out of the market and the lower rates will allow investors to find their feet once again.
As we can see above, opinions are divided on whether the slowdown in growth rates are a positive or negative thing, but Russell Quirk, founder and chief executive at E.Moov.co.uk is not concerned, stating that London’s market is bound to catch up with other UK areas in due time: “It is not surprising that the UK’s market stabilises as we head into the busy Autumn selling season after a slowdown during August. London’s stall in growth during September is likely a continued ripple effect from the summer holidays as schools opened their doors and potential homebuyers were getting back into a routine with family. There are optimistic signs that the resilient London market will catch up to the rest of the UK in the coming months.”
Will it benefit first time buyers?
Of course, market decline spells bad news for buy to let investors, but for first time buyers, the low prices and lack of competitive interest puts them in a great position to get their feet on the property ladder – and make their home in the capital.
Whilst Savill’s five-year forecast predicts that London property prices will fall further, remain level throughout 2018 and only begin to rise again once Brexit negotiations and processes are behind us, that does not guarantee that first time buyers are in the clear.
To find out more about your options as a first time buyer in London, have a look at our First Time Buyer Guide.
At London Money, we know the London markets inside out, so for advice and insights into the options facing you, get in touch.