House prices rise across UK – except in prime central London

While the value of homes in Britain as a whole rose further last month, high-end property in the capital's smartest boroughs tanked once again.

Outside central London in places such as Great Budworth, Cheshire, in north-west England, house prices have risen. Paul Thomas / Bloomberg
Powered by automated translation

The price of central London’s most expensive homes fell again in October, while those in the rest of the United Kingdom rose, new reports said on Monday.

In the latest sign that the capital’s high-end property market is cooling since Britons voted to leave the European Union, Knight Frank said prices fell by an annual 2.3 per cent last month in London’s most desirable postcodes, the biggest drop in seven years.

A decline of 1.8 per cent in August and 2.1 per cent in September had been the biggest falls since October 2009, when prices fell 3.2 per cent as Britain began recovering from the effects of the financial crisis.

Prime central London stretches from Kensington and Notting Hill in the west to the City of London in the east. The biggest drop was recorded in Chelsea, where prices fell 9.9 per cent.

“Uncertainty generated by the decision to leave the EU has made vendors more realistic on asking prices,” aid Knight Frank’s head of London residential research Tom Bill.

Stamp duty – paid on purchases of new homes – was increased from April on second homes and buy-to-let purchases, particularly hitting central London where many buyers are foreign investors.

The timing, which brought forward many purchases and resulted in a slump afterwards, makes it difficult to disentangle the effect from the uncertainty created by the run-up to the June 23 referendum and the decision to leave the EU.

The upmarket estate agents Savills said in September that prices in London’s prime locations will fall by 9 per cent this year and not grow again until 2019.

There are also signs that foreign investors are bargaining down prices and using the fall in the value of the pound, which has declined by around 15 per cent against the euro and the dollar since the referendum, as a way to snap up London property with large discounts.

“While sales have been weaker, a combination of lower asking prices and a weaker pound has begun to push demand indicators higher,” said Bill.

Across the whole of the United Kingdom, however, home prices rose for a second month in October, helped in part by an ongoing lack of supply of properties for sale.

The mortgage lender Halifax said values rose 1.4 per cent compared with a month earlier as the stock of homes available remained around a record low. From a year earlier, values in the three months to October were 5.2 per cent higher. That is far below a peak of 10 per cent annual growth in March this year, but still “robust”, the Halifax said.

The monthly increase lifted average values to £217,411 (Dh992,313).

The housing market has been stronger than many expected following the vote to quit the European Union. After the first interest-rate cut in seven years in August, mortgage approvals rose in September after slipping for most of this year, according to the Bank of England. The central bank said activity is being buoyed by positive consumer sentiment alongside record-low borrowing costs.

“Very low mortgage rates and a shortage of properties available for sale should help support price levels,” said Martin Ellis, an economist at the Halifax.

The lender also said that activity levels “have softened compared with a year ago”, although sales have stabilised after distortions earlier in the year due a tax change.

* Agencies

Follow The National's Business section on Twitter