London Home Prices Post First Fall Since 2012 on Demand DropScott Hamilton
London house prices fell for the first time in almost two years this month as declining demand led to a weakening of the property market across Britain, Hometrack Ltd. said.
The survey of real-estate agents showed values in the capital dropped 0.1 percent, the first decrease since November 2012, and further “modest” declines are likely in the coming months, the property-research company said in a report today. National prices stagnated, bringing to an end 19 months of increases.
The survey chimes with other reports showing the London housing market is slowing sharply after values surged by about a quarter over the past year. Hometrack cited a tightening of loan criteria and the prospect of a Bank of England rate increase.
“Buyer uncertainty is growing in the face of a possible interest-rate rise, a general election on the horizon and recent warnings of a house-price bubble,” said Richard Donnell, director of research at Hometrack. “Played out against a backdrop of tougher mortgage affordability checks and limits on high loan-to-income lending, higher-value postcodes of inner London are clearly being impacted.”
While momentum cooled across Britain, London is “experiencing a pronounced slowdown” and was the only region to post a fall in values this month, Hometrack said. Fewer sellers in London and southeast England are achieving their asking prices, it said.
Government data today showed house prices in England and Wales rose 1 percent in August, and by 8.4 percent from a year earlier. London’s 21.6 percent annual gain took the average price of home in the capital to 467,070 pounds ($762,000), more than 2 1/2 times the national average, according to the Land Registry.
Pent-up demand for housing following the recession has now receded, though there is also little evidence of supply opening up, Donnell said.
“Although the lead indicators suggest buyers will start to gain the upper hand, there are many home owners who don’t need to sell and won’t bother unless it’s financially beneficial to do so,” he said. “The net result is a likely drop-off in activity in the coming months.”
U.K. government bonds rose, sending the yield on the 10-year gilt one basis point lower to 2.43 percent at 10:37 a.m. London time. The pound was little changed at $1.6317.
In a separate report today, jobs website Adzuna said advertised wages grew faster than inflation in August for the first time since the financial crisis. Salaries increased 1.9 percent from a year earlier, compared with an 1.5 percent gain in consumer prices, the company said.
Wages are at the center of the debate over when BOE officials should raise borrowing costs, with most saying this month that the lack of inflationary pressure in the labor market justified keeping the benchmark rate at a record-low 0.5 percent.