LONDON – London house prices are falling for the first time in 8 years, according to Nationwide.
The building society’s house price index, which is based on mortgage offers it issues, said prices were down 0.6% year-over-year in September, the first decline since the third quarter of 2009.
London remains the most expensive UK region, with an average house costing £471,761 compared to the national average of £210,982, but the price fall made it the weakest performing region for the first time since 2005.
The UK rate of house price growth remained broadly stable in September at 2.0%, compared with 2.1% in August.
Jeremy Leaf, an estate agent and former RICS residential chairman, said the slowdown was driven by bloated prices, slow progress in Brexit negotiations, and worries about an imminent interest rate rise from the Bank of England, which would drive up mortgage costs.
He said: “The London market is struggling for mainly affordability reasons and it is only those sellers who recognise the changed market conditions that are doing deals.
“Buyers and sellers are still nervous about prospects for the market in view of lack of perceived progress in Brexit negotiations and concerns about imminent rises in interest rates.”
Lucian Cook, director of residential research at Savills, told Business Insider in June that London’s residential market was suffering because lenders are hitting up against limits for the expensive mortgages buyers in London require.
He also said higher prices and stretched finances meant the market was more sensitive to issues like Brexit which can affect a change in sentiment.
‘The slowdown will get worse’
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the UK slowdown is likely to get worse if the Bank of England hikes interest rates.
“With the real wage squeeze set to remain intense over the next six months and mortgage rates about to rise, we continue to think the housing market will weaken further over the winter,” said Tombs.