New research shows tentative signs that collapse in the capital’s housing market is slowing.House prices in many parts of London have been falling for some time as the overpriced market corrects itself, but new research suggests the long slump could finally be coming to an end.
The Daily Telegraph’s Marianna Hunt says “dampened demand, as buyers were put off by tax changes, high prices and poor value for money”, combined with uncertainty around Brexit has seen the number of sales in the capital fall by a quarter over the past five years.Now new research by property website Zoopla suggests the slump in house price growth may be slowing. In October 2018 the level of house price falls plateaued and the number of areas in London registering a drop in prices has since fallen from 80% in October to 68% today.House price growth is predicted to be flat this year before picking up in 2020. “As the cost of buying in the capital realigns with average salaries, experts predict that demand will bounce back,” says Hunt.
Separate research by Rightmove also points to tentative sings the collapse in London’s housing market is slowing.
In the year to June, asking prices across London fell by 2%, which is the smallest decline measured since January and an improvement on the 3.8% decrease recorded in March.Homes & Property says “the slight upswing is thanks to higher numbers of first-time buyers taking advantage of low mortgage rates and the market slowdown”.“The London housing market is coming to the end of what can be described as a three to four year repricing process, in which many areas have experienced small, single digit falls,” said Richard Donnell from Zoopla. “House prices grew rapidly between 2010 and 2016 and we’re currently seeing those prices fall back into line.”Hunt says “house prices in London fell partly because of the nature of property cycles: values rise too high and then this is followed by a correction as local people struggle to afford the higher prices”.
Yet while market conditions currently favour first-time buyers, “there remains a gulf between wages and prices”, says Homes & Property.
Despite recent falls, the average asking price for a home in the capital still currently stands at £618,880, almost double the average of the rest of the country.
“Affordability is arguably the biggest drag on the market as, despite sluggish price growth as a result of Brexit, many still struggle to raise the capital required for a mortgage deposit,” says Marc von Grundherr, director of Benham and Reeves.
Research from Halifax has found key public sector workers, including nurses, teachers, paramedics, police officers and firefighters, can only afford to own a home in 8% of towns across Britain.The mortgage provider looked at housing affordability for the five professions across 515 towns, including 31 London boroughs. It found only 40, or 8%, of these areas were affordable – down from 24% in 2014.In some areas, a home typically costs more than 18 times a key worker’s average annual wage, with the least affordable areas for key workers unsurprisingly in London and the Southeast, “where house prices are significantly higher than the national average”, reports Metro.
As average London house prices continue to fall, some select areas of the capital continue to buck the trend, with the City recording the biggest post-recession recovery out of any region in the UK over the past decade.
According to the latest Land Registry House Price Index figures, London house price growth experienced a 1.9% fall over the past year, with the average home costing £463,283 in March 2019, down from £472,357 12 months before.
The prime housing market in London’s central zones, which attract a high concentration of international investors, was hardest hit. In Kensington and Chelsea, prices dropped by a massive 16.4%, while prices in Westminster plummeted 14%.
“Brexit uncertainties and consumer worries about the economy have weighed on the market, compounding the problem of stretched affordability in London and the South,” writes Ian Stewart, Deloitte’s chief economist in the UK, on Reaction. “Higher rates of stamp duty on more expensive properties and weaker demand from foreign buyers have had their greatest effect on the London market. Meanwhile increased rates of stamp duty on additional homes, reduced tax reliefs and new regulations have dented the attractiveness of buy-to-let.”