by Angela Monaghan 17 October 2018 Guardian Photograph: Getty
London has become a weak spot in the property market after a prolonged period of rapid price rises has left many potential buyers unable to afford a home in the capital.
Average UK prices rise 3.2% but sluggish London property market sees fall of 0.2%
UK house prices grew at the slowest rate in five years in August, in the latest figures to identify a growing divergence between a sluggish London property market and faster rates of growth other regions.
The average price of a UK home increased by 3.2% in the year to August, to £232,797, in the lowest annual rate of growth since August 2013, according to the figures from the Office for National Statistics (ONS) and Land Registry.
London was the only region where prices fell on an annual basis, down 0.2% in year to August, but it was still easily the most expensive place to by a home, with average prices at £486,304.
After London, the east of England was the weakest region for house price growth, up 1.6% in the year to August to an average price of £292,107.
London’s fortunes contrasted with the east Midlands, where the average home costs £194,718 and annual price growth of 6.5% was the strongest across the UK.
Mike Hardie at the ONS, said: “UK house prices again increased across the year, with growth particularly strong in the east and West Midlands. We continued to see a slowdown in London and the east of England.”
London has become a weak spot in the property market after a prolonged period of rapid price rises left many potential buyers unable to afford a home in the capital.
A higher rate of stamp duty on second homes has also affected buyer appetite in London, while international buyers traditionally keen to snap up property in the capital are being deterred by uncertainty surrounding Brexit negotiations, according to analysts.
Richard Snook, senior economist at PwC, said: “London remains the biggest regional story as the price decline continues, albeit at a modest rate. Prices in August were 0.2% below their level 12 months ago. The London market has been flat over this period, with Brexit-related uncertainty undoubtedly affecting the confidence of buyers and sellers alike.”
The accountancy firm is forecasting a 3% rise in UK house prices in 2018, while prices in the capital are expected to fall by 1.7%.
Jeremy Leaf, a north London estate agent and a former residential chair of the Royal Institution of Chartered Surveyors (Rics), said: “A clearer regional pattern is emerging as buyers seek better value for money outside London, whereas prices in the capital continue to drift down.”
On a monthly basis, average house prices in the UK increased by 0.2% in August, according to the ONS/Land Registry data. Prices were down 0.5% in London, but it was not the biggest faller over the month, with prices down 1.1% in the east of England and down 1% in Northern Ireland.
House prices rose fastest in Wales in August, up 1.9% over the month to an average £162,374.
Kevin Boa, property partner at the law firm Pinsent Masons, said slowing house price growth in the UK was the result of a “perfect storm” in the property market: “Interest rate increases, government policy changes that have shrunk the buy-to-let market, Brexit upheaval and the reduction in EU and overseas buyers, particularly in London, all contribute to this decline. Despite this, there remains a huge undersupply of housing which will only become more acute over time.”
In another sign of weakness in the London market, the housebuilder Crest Nicholson warned annual profits would be lower than expected because of slowing sales in the capital and the south-east, where Brexit uncertainties are putting off buyers in the traditionally strong autumn selling season.
Crest Nicholson issues profit warning as house sales in London slow
The company said it had not seen a pick-up in demand, with prospective buyers unable to afford pricier homes of above £600,000 and unwilling to make major spending decisions at a time of heightened political and economic uncertainty.
Crest Nicholson expects pre-tax profits of between £170m and £190m in the year to 31 October, lower than the £205m it forecasted in June and the £207m it achieved in the previous financial year. The company’s share price closed down more than 8% at 296p.
“The usual autumn pick-up in sales volumes has not been evident during September and October, with many customers putting off decisions to buy while current political and economic uncertainties persist,” said Stephen Stone, the company’s executive chairman.
There are some major social changes taking place which mean that housing trends are being affected. Added to the precarious political situation situation it’s understandable that the market is having some trouble.