The London property market slowed sharply in January following a surge in prices through the autumn, official figures reveal today.
The average cost of a home in the capital dropped 1.8 per cent from £519,653 to £510,102 during the month, according to data from the Land Registry.
That left prices just 2.2 per cent higher than a year previously, making London the slowest growing property market of any region in the UK.
Across the country as a whole prices rose by 9.6 per cent to an average of £274,000 over the 12 months to January.
However, the picture in London was patchy with some boroughs still seeing strong year on year growth. Prices in Richmond were up 12.4 per cent, while Barking & Dagenham saw a 10.6 per cent rise, Tower Hamlets saw the biggest fall with prices down 5.1 per cent.
Mike Scott, chief analyst at estate agency Yopa said: “London is still growing much more slowly than the rest of the country, up by only 2.2 per cent on the year. This will be partly a response to London workers being able to live further from the office as they are now working more from home, and partly a continuation of a trend that started in 2016, with slower growth in London after its house prices had grown much more rapidly than the rest of the country for the previous several years.”
Detached homes saw the biggest fall, down just over three per cent, reversing the “race for space” trend of the pandemic years, when flats were the hardest to sell.
House buyers may have been more cautious about taking on large mortgages in January after the Bank of England increased its key interest rate in response to rising inflation in December, making home loans more expensive.
Today’s higher than expected rise in inflation to 6.2 per cent makes further interest rate hikes more likely over the coming months.
However, despite the dip in prices in February most London agents have seen strong demand from buyers and a severe shortage of stock in February making it more likely that prices will start to rise again in the spring.
Comparing annual house price rises with average salaries, estate agent Savills warned of a looming housing affordability crisis. UK house prices rose by more than £24,000 in the year to February while average wages were £31,285 in 2021, meaning the average home value rose by 77 per cent of gross earnings.
Homes in the South East — the traditional London commuter belt — rose by almost £38,000, 11 per cent higher than median annual earnings for the area.
Lawrence Bowles, director of research at Savills, said: “The ONS housing affordability analysis released today revealed that house prices rose faster than earnings in almost all (91 per cent) local authorities across England and Wales last year.
“Rapid house price growth and rising interest rates are creating a perfect storm for first-time buyers. Additionally, with Help to Buy due to end just a year from now, we expect the housing market to become increasingly polarised between those whose parents can afford to help them onto the housing ladder and those who can’t.
“Aspiring first-time buyers will be watching to see what new support the government can offer them to their keep dreams of home ownership alive.”
