The typical London house price is down £26,514 over the last year, according to the latest Halifax index.
Prices have falled 4.8 per cent in the capital as mortgage rates force sellers to be “more realistic”.
An average London property is now £525,678, according to the report.
“Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability,” said Kim Kinnaird, director, Halifax Mortgages.
“Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.”
House prices are flat even in the most affluent parts of the capital since Liz Truss’s disasterous mini budget last year.
“Results confirm what we are seeing on the ground,” said Jeremy Leaf, a north London estate agent.
“Business is bumping along at a new, lower level as buyers and sellers are encouraged partly by expectations of lower interest rates, and higher rents making refuge in the lettings market less likely, particularly for those taking their first steps on the ladder.”
Against this backdrop, homeowners inevitably become more realistic about their target selling price
First-time buyers have become the most significant players in the market in many parts of London.
“While the recent unexpected decision by the Bank of England to maintain the base rate at 5.25 per cent will be a relief for mortgage-dependent buyers, this rate is still significantly higher than last year,” said Iain McKenzie, CEO of the Guild of Property Professionals.
“This has led many potential buyers to adjust their expectations and hold firm during price negotiations with sellers.”
If buyers are brave enough to make a lower offer, they may well get a better deal.
“The property market is offering a much stronger supply of homes than it did during 2021, when we saw frantic buying activity,” said Nicky Stevenson, managing director at estate agent group Fine & Country.
”This is giving buyers much more choice and headroom to haggle – though it is also playing a part in pushing down prices during negotiations with sellers.”
With interest rates being held, mortgage brokers beginning to offer comparatively competive rates.
Attractive offers can sometimes mask higher arrangement or product fees
“While everyone is on the watch for potential headwinds, on the whole lenders are much more confident in their ability to price products,” said Mark Harris, chief executive of mortgage broker SPF Private Clients.
“There is much less volatility in the cost of funds than was the case just a few months ago, while there is also a growing feeling that base rate may have peaked.”
But after 14 consecutive rate hikes, an end to mortgage pain isn’t in sight.
“Lenders have made a flurry of rate cuts in recent weeks, but attractive offers can sometimes mask higher arrangement or product fees, while some providers are also weaving in separate booking, valuation or conveyancing fees on top,” warned Alice Haine, personal finance analyst at investment platform Bestinvest.
“Ultimately, better rates and a potential end to further interest rate rises will do little to ease the financial pain for prospective buyers and existing homeowners in the short-term,” she added.
“Mortgage rates of today remain significantly higher than the all-time lows of 2021, before the Bank of England began its aggressive rate hiking cycle.”
Most of the UK’s house price correction will happen this year
The downward trend may continue, although all eyes are on the next general election, which is due by January 2025 but could be called by spring 2024.
“The financial pain entering the system will continue next year as people roll off fixed-rate deals, but there will be an improvement in sentiment, that vital lubricant in the housing market,” said Tom Bill, head of UK residential research at Knight Frank.
“We therefore think most of the UK’s house price correction will happen this year and modest single-digit annual growth will return after the next general election.”
Across the UK, Property prices dropped by 4.7 per cent annually in September, with southern England continuing to see most downward pressure on prices, reported Halifax..
The typical UK home now costs £278,601, which is around the level seen in early 2022, Halifax said.
The average property price remains more than £39,000 above pre-pandemic levels, despite being around £14,000 below a peak recorded in August 2022.
House prices are down most sharply in the southern regions, while Scotland has recorded a drop of only 0.8 per cent and Northern Ireland just 0.2 per cent.
On a month-on-month basis, average house prices have been falling for six months in a row.
Average house prices and the annual change
Region |
Average house price |
Annual change |
South East |
£376,450 |
- 5.7 per cent |
South West |
£293,615 |
- 5.5 per cent |
London |
£525,678 |
- 4.8 per cent |
Eastern England |
£325,393 |
- 4.5 per cent |
East Midlands |
£234,446 |
- 4.1 per cent |
Wales |
£214,585 |
- 3.6 per cent |
West Midlands |
£247,448 |
- 2.8 per cent |
Yorkshire and the Humber |
£201,350 |
-2.8 per cent |
North West |
£223,007 |
- 2.4 per cent |
North East |
£167,196 |
- 1.9 per cent |
Scotland |
£201,594 |
- 0.8 per cent |
Northern Ireland |
£184,108 |
- 0.2 per cent |
