House prices are falling in 42% of London postcodes, says Hometrack

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House prices are falling in 42 per cent of London’s postcodes and are tipped to fall across the capital by summer, according to a new report today.

But while the capital just about kept its head above water with annual house price growth of 1 per cent, cities in the Midlands and North are see a mini-property boom.

Hometrack said that Edinburgh, Liverpool, Leicester, Birmingham and Manchester all recorded price inflation of over 7 per cent.

While annual house price inflation in London has ebbed away almost to nothing, cities in the North and Midlands are seeing a mini-boom, Hometrack's figures show

While annual house price inflation in London has ebbed away almost to nothing, cities in the North and Midlands are seeing a mini-boom, Hometrack's figures show

While annual house price inflation in London has ebbed away almost to nothing, cities in the North and Midlands are seeing a mini-boom, Hometrack’s figures show

London house prices have seen the smallest rise in nearly seven years and are set to start declining this summer as already two fifths of the capital’s postcodes are recording price falls, new data show.

Annual house price inflation in London has tumbled from 4.3 per cent a year ago, with the 1 per cent rise representing the smallest increase since August 2011.

Hometrack said the decline in the capital was due to a mix of Brexit uncertainty, tax changes for property investors and stretched affordability after years of steep price rises. 

It also noted how the proportion of boroughs recording declines (a 42 per cent) was at its the highest since the financial crisis. 

But despite London’s falls, house price inflation across the UK’s top cities accelerated to 5.2 per cent from 4 per cent a year ago, driven by strong growth in regional cities outside southern England.  

Hometrack said that half of the 20 UK’s top cities saw prices grow faster than last year, while the other 10 saw house price inflation ease. 

10 cities saw prices grow faster than last year, while the other 10 saw house price inflation ease

10 cities saw prices grow faster than last year, while the other 10 saw house price inflation ease

10 cities saw prices grow faster than last year, while the other 10 saw house price inflation ease

The pick-up in regional cities stands in contrast to London, but also to other southern cities, such as Bristol and Southampton, which have also seen growth slow down. 

Hometrack's UK Cities house price index

Hometrack's UK Cities house price index

Hometrack’s UK Cities house price index

Bristol recorded house price growth of 4.1 per cent, compared to 7.7 per cent in February last year. Similarly, Southampton slowed from 5.8 per cent to 2.8 per cent.

Cambridge and Aberdeen were the only two cities to see prices fall, although Hometrack expects more cities to begin seeing prices to fall.

‘We expect the balance of markets registering price falls to increase over 2018 as prices continue to adjust to what buyers are prepared to pay,’ said Richard Donnell, insight director at Hometrack.

In London, house prices continued to increase in 58 per cent of postcodes, but this proportion has shrunk over the past two years and if the current trend continues, the rate of headline growth in the capital is set to turn negative from mid-2018.

‘The weakness in London’s housing market has been building since 2015 on the back of numerous tax changes aimed at overseas and UK investors and growing affordability pressures facing home owners,’ Donnell added.

‘Sales volumes are first to be hit when demand weakens and housing turnover across London is down 17 per cent since 2014. Sales prices are next to follow but with few forced sellers the level of price falls remains low.’

London is a buyer’s market 

House price falls: The London postcode that includes Camden saw the second biggest price fall in the capital at 1.9% after the City of London, where prices fell by 7.9%

House price falls: The London postcode that includes Camden saw the second biggest price fall in the capital at 1.9% after the City of London, where prices fell by 7.9%

House price falls: The London postcode that includes Camden saw the second biggest price fall in the capital at 1.9% after the City of London, where prices fell by 7.9%

The strength of the regional cities comes as they see a pick-up in economic growth and prospects, says Simon Heawood, CEO of property investing platform Bricklane.com, which runs both London and regional funds.

The good news for those looking for a home is that this makes London a buyer’s market at the moment, he added.

Heawood said: ‘Whilst London has been the investor’s choice for many years, it’s clear that markets outside the capital are performing strongly.

‘Most of the UK’s ‘gateway’ cities such as Birmingham and Manchester boast attractive demographic trends and are benefitting from significant investment and infrastructure projects – increasing their attractiveness to buyers.

‘The London figures speak to the importance of investors staying dispassionate and selective in their approach.

‘There are clear falling prices in some areas and at some price points, but it is a buyer’s market and opportunities abound. Whilst there is still some ways to go in terms of improving affordability, buyers ready to get on or move up the property ladder will be looking to capitalise on the current fall in prices.’

The slowdown in the capital is mainly driven by price falls across inner London postcodes, with now fifteen of the 46 local authorities that make up the London index, or 42 per cent, experiencing price falls. 

Hometrack said this was the highest proportion since the financial crisis.

The biggest price falls in London were in the City of London, where prices fell 7.9 per cent, followed by Camden, where prices fell 1.9 per cent in the year to February, Southwark, with prices down 1.8 per cent and Islington, where prices dropped 1.4 per cent.

But in spite of the slowdown, average London house prices are still up a whopping 86 per cent compared to 2009 levels, Hometrack said.

‘Away from southern England house price growth remains robust in regional cities where prices have registered lower overall growth since 2009 and affordability levels are in line with their long run average,’ Donnell added. 

Slowdown: London house price inflation was just 1% last month and Hometrack said it expects the capital to see prices fall from mid-2018

Slowdown: London house price inflation was just 1% last month and Hometrack said it expects the capital to see prices fall from mid-2018

Slowdown: London house price inflation was just 1% last month and Hometrack said it expects the capital to see prices fall from mid-2018

 

 

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