London house prices fell by 4.8% in 2023, faster than any other region and close to a 15-year high, but nowhere near the property market crash that was predicted.
According to Land Registry data, the average London house price was £508,000 in December 2023. While that marks a fall of £25,000 on a year-on-year basis, it’s a long way from predictions of a double-digit percent crash for the capital’s property sector.
House prices remained surprisingly resilient as mortgage rates soared last year, in response to Bank of England rate hikes that were needed to bring inflation back under control.
The average price is little changed from last month’s data, when values were down 5.5% year-on-year.
In the UK as a whole, prices were down by 1.4%, which again was a much smaller drop than many experts had predicted.
The figures from the Land Registry are based on completed sales, and so tend to lag many other measurements of house prices, such as those from lenders Nationwide and Halifax. The latest data from the two mortgage giants shows that a house price recovery is firmly underway, with four months of rising prices. Lower-than-expected January inflation figures could lead to a further recovery in house prices, as mortgage lenders could reduce rates in anticipation of the Bank of England cutting its own base rate soon.
Marc von Grundherr, Director of Benham and Reeves, said:“The decline in house prices seen during the latter stages of 2023 has been marginal in the grand scheme of things and they remain there or thereabouts when compared to the record peaks seen during the pandemic market boom.
Of course, the London market has naturally been hit the hardest given the far higher cost of homeownership and the greater borrowing requirements will also mean that it trails the rest of the nation when it comes to a rebound in positive property price growth. “
However, when it does turn, it turns quickly and it’s only a matter of time before the sleeping giant of the UK property market awakens.”
Jason Tebb, president of OnTheMarket, said: “December’s slight uptick in average property prices is in line with other surveys, reflecting softer transaction volumes as the market returned to seasonality and only the most committed of buyers and sellers eschewed the festivities in favour of moving.
“Since the start of the year, the picture has improved with falling mortgage rates encouraging buyers and sellers to return to the market. Stock levels and new enquiries have risen as market stability and confidence has been boosted by expectations that the Bank will start cutting interest rates soon.
“While inflation is still double the Bank’s target, it was softer than expected in January and is forecast to continue edging downwards, although there will be bumps in the road. Demand and activity levels are expected to strengthen but with affordability impacted by last year’s successive rate rises and the higher cost of living, sellers should take advice and come to market at a sensible level.”
