London home sellers cut asking prices by the most in more than six years this month, adding to signs that the property market in the U.K. capital is coming off the boil.
London values fell 5.9 percent from the previous month to an average 552,783 pounds ($922,300), the biggest drop since December 2007, property website Rightmove Plc said today. Nationally, prices declined 2.9 percent, a record for an August.
While property demand usually weakens during the summer, Rightmove said the slump this year was steeper than it expected. Tougher new mortgage rules introduced by Bank of England Governor Mark Carney, as well as anticipation of higher interest rates, are putting pressure on the market after a surge in values raised concerns that a bubble may develop.
“Buyers and sellers are becoming increasingly aware about personal finances, given that the cost of mortgages are going up and regulators are trying to bring availability down,” said Miles Shipside, a director at Rightmove. “This limits what buyers are willing or able to pay, and helps moderate sellers’ price expectations.”
Some of the biggest price declines in London were recorded in affluent boroughs including Kensington and Chelsea, Camden, Hammersmith and Fulham, according to the report.
Among the “million-pound plus” districts, Kensington saw asking prices drop 7 percent on the month to an average 2.2 million pounds, while Camden fell 7.2 percent. From a year earlier, values in Kensington were down 1.4 percent, the only borough recording an annual decline. The average London price is up 10.3 percent in that period.
“Top-end sellers are very much discretionary ones, so can delay marketing till a more active time of year,” Shipside said. “That tends to depress property prices more in the higher-priced boroughs, with those that need to sell in summer pricing lower to attract holiday-distracted buyers.”
Bruce Dear, head of real estate at law firm Eversheds, said the main problem in London remains a shortage of housing supply, which has pushed property prices to more than 16 times the average salary.
“Urgent policy measures are required to reduce that gap,” he said in a statement. “The only answer is for the government and local authorities to urgently build more.”
Nationally, the annual pace of growth in prices slowed to 5.3 percent in August from 6.5 percent in July. The average asking price was 262,401 pounds. Rightmove said the drop in monthly prices is a “lead indicator of a slower market in the second half.”
Out of the 10 regions tracked by Rightmove, all but the north of England showed a decline in home values in August from July. London led the drop, followed by East Anglia with a 4 percent drop and the south east with a 2.5 percent fall.