The average Londoner is paying an extra £244 per month on their mortgage as war in Iran and political uncertainty have caused the capital’s property market to slow down, new data reveals.
Zoopla’s House Price Index, released today, shows that sales agreed in the capital are down by nine per cent since last year, as buyers adopt a more cautious, wait-and-see approach. This is below the national average, at seven per cent.
Buyer demand, meanwhile, is down by 12 per cent, and the vast majority - 72 per cent - of properties listed for sale since January remain on the market.
Trump’s war in Iran, questions over future tax and spending priorities in the autumn budget and the impending change of Prime Minister have all contributed to this slowdown, causing borrowing costs to spike.
In April, for example, mortgage rates hit five per cent, adding £244 per month to the average Londoner’s mortgage. This is considerably more than in other parts of the country, where typical mortgage payments have risen by £125 per month.
First-time buyers in the capital, likewise, are paying £232 more per month on mortgage costs, equivalent to £2,784 per year.
The effect is most pronounced in London, where a first-time buyer faces both a higher mortgage payment and stamp duty costs of around three per cent of the purchase price. An equivalent buyer in the north of England would pay less than one per cent.
This is having a knock-on effect on London’s house price growth, which sat at -0.2 per cent in May – lower than any other region in the country. Nationally, average house price inflation is at 1.4 per cent.
This is the ninth consecutive month of negative annual house price inflation in the capital.
"A combination of too much property on the market across various price ranges, as well as continuing uncertainty about the protracted war in Iran and the subsequent impact on the economy, is proving lethal as far as homebuyer and seller confidence is concerned,” said north London estate agent Jeremy Leaf.
“Sales are taking much longer and it is proving increasingly difficult to generate commitment. However, the overwhelming majority of sales which have been agreed are proceeding, although inevitably more slowly and suffering relatively few price negotiations.
“This is likely to prove the 'new normal' at best, looking forward, particularly now that domestic political uncertainty is another factor to consider.”
The national picture
It’s not just London: buyer demand and the number of agreed sales are down throughout the country too.
Wales has seen the highest dip in agreed sales, down by 12 per cent year-on-year, while East Midlands, the East of England and the South West all saw drops of more than 10 per cent.
Buyer demand, likewise, is down by 15 per cent nationwide, reaching -30 per cent in the West Midlands, -29 per cent in the North East and -22 per cent in the East Midlands.
Scotland and northern England have been less affected, largely because there were already fewer homes for sale —Scotland and the North West both recorded a 4 per cent decline in sales stock— and because mortgage repayment increases are less dramatic.
As a result, the two regions have experienced the highest house price growth in the country, at 3.5 per cent in the North West and three per cent in Scotland.
While two and three-bedroom houses are performing at a similar pace to last year, one and two-bedroom flats have seen the biggest slump nationally, with over two-thirds listed this year remaining unsold. This reflects the impact that higher buying costs are having on first-time buyers, who are the typical audience for these kinds of properties.
“Higher mortgage rates have hit sales and squeezed affordability for home buyers alongside increased political uncertainty. The impact is less severe than what the market faced after the 2022 mini-budget, and mortgage rates have started to fall,” says Richard Donnell, Zoopla’s executive director.
“The national picture can only tell you so much, and local market conditions vary considerably across the country. The most important step, whether you are buying or selling, is speaking to a local agent who knows what is actually happening on your street.
“For sellers still waiting for an offer, the conversation to have is about price. Correctly priced homes are selling, while overpriced homes are sitting.
“For buyers, rates are falling, there is more choice of homes for sale than a year ago and motivated sellers are willing to negotiate. If you are ready to move, conditions are more favourable than they were three months ago.”
