London house prices fall again as property slowdown drags on
London house prices fell again in May as uncertainty over Andy Burnham’s premiership dampened market confidence.
The average house price in the capital slipped by 3.7 per cent to £545,000 in the year to May, according to the Office for National Statistics (ONS).
Prices jumped in the rest of the country, though the headline rate of house price growth slowed to 2.7 per cent, down from 3.8 per cent in April.
London’s wealthy neighbourhoods continued to suffer the most from the capital’s housing market slowdown.
House prices plummeted by 22.8 per cent in Westminster and by 10.7 per cent in Kensington and Chelsea. In Hammersmith and Camden prices slipped by seven and six per cent respectively.
Property experts say London’s housing market is suffering because the high property values drag more buyers into paying stamp duty.
The government offers stamp duty relief to first-time buyers on transactions up to £300,000 in a bid to shelter them from the tax.
But four in five first-time buyers in the capital pay the tax compared to one in ten in the North of England, according to property portal Zoopla.
London’s house buyers are also worse hit by the spike in mortgage rates caused by the Iran war, because they typically need higher mortgages.
“Buyers in London and the South East typically need larger mortgages, and the spike in interest rates following the outbreak of conflict in the Gulf has limited the amount they can afford to borrow,” said Jonathan Hopper, chief executive of property advisor Garrington.
Buyer demand slows
Nathan Emerson, who runs estate agency trade body Propertymark, said that uncertainty around Burnham’s approach to property taxation could weigh on consumer confidence over the coming months”.
The summer heatwave and World Cup are also to blame for the UK’s slowing property market, according to Zoopla, because prospective buyers are too distracted to hunt for deals.
Buyer enquiries are a fifth lower than at the same time last year, with agreed sales down by seven per cent.
“Political change, the World Cup, a scorching summer and elevated mortgage rates have hit housing market activity this summer,” Zoopla executive director Richard Donnell said.
But property market activity is likely to pick up in the autumn once the “outlook becomes clearer” following Burnham’s first Budget, Donnell added.