House prices are falling in almost half of all London postcodes, according to new figures showing the most widespread collapse in property values across the capital since the 2008 financial crisis, The Guardian reports.
The latest signs of distress will stoke concerns that sliding prices are far from confined to the most expensive homes in central London, with the figures showing a ripple effect spreading into the suburbs.
In contrast to the struggling London property market, cities elsewhere across the country such as Edinburgh, Liverpool and Manchester are registering house price growth in excess of 7% per year.
According to data provider Hometrack, which is part of the Zoopla property group, as many as 42% of all London postcodes have seen house prices fall over the past year – with the majority of these areas seeing values drop by up to 5%. The biggest falls were reserved for central areas, with prices falling in the City of London by as much as 8%.
Although the majority of London postcodes are still registering growth, the number of areas with rising house prices has declined sharply over the past two years. Prices in central areas such as Camden, Islington, Wandsworth and Southwark are leading the declines, although there are now also falling property values in suburban areas such as Harrow, Kingston upon Thames and Elmbridge.
The most recent figures from the Office for National Statistics show the national rate for annual house price growth fell slightly to 4.9% in January from 5% a month earlier. The average UK house price was unchanged at £226,000 in January.
In the capital as a whole, annual prices rose by £5,000 in January to take the value of a home to £486,000, while average house prices dropped in the north-east of England – the cheapest area of the country – by £7,000 to stand at £123,000.
The latest reading from Hometrack suggests the north-south divide in house prices is gradually beginning to narrow as the booming London property market fizzles out. Earlier this month, rival data provider YourMove said house prices had fallen in some parts of the capital by up to 15%, but had risen by about 16.4% in Blackburn.
Rising prices away from the south-east of England are coming after years lagging behind stellar growth in the capital, fuelled by improving regional economies and a shortage of new homes being built across the country.
Richard Donnell, insight director at Hometrack, said tax changes had affected overseas and domestic investors’ appetite for property, while stretched affordability levels for owner occupiers had compounded uncertainty caused by Brexit.
Property prices across the capital have risen by 86% since 2009, putting the cost of buying a home out of reach for almost all but the wealthiest.
“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,” he said.
The development comes at a troubling moment for the property market, amid falling inquiries from new buyers and the average number of house hunters on estate agents’ books having fallen by almost a third in the year to February.
The Bank of England is preparing to raise interest rates from as early as May, which could further compound the pressure on the mortgage market by raising the cost of borrowing for new buyers and existing homeowners.
Philip Hammond, the chancellor, removed stamp duty for the majority of first-time buyers at the budget in the autumn, although the latest readings from the housing market suggest his reforms are likely to have fallen flat.
According to UK Finance, an industry body representing the high street banks, mortgage borrowing fell in February, with the monthly number of home loan approvals falling by about 2,000 to stand at 38,120 last month. House purchase mortgage approvals also saw a sizable fall.
Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, said the drop-off in mortgage approvals appeared to be “confirming that the chancellor’s decision to reduce stamp duty for most first-time buyers in November has failed to reinvigorate the market”.