House prices in London fall at fastest rate for a decade
By Abigail Townsend
Date: Wednesday 17 Jul 2019
(Sharecast News) - House prices fell sharply in London to a near-10 year low in May, as Brexit jitters weighed on the capital's housing market.
According to the Office for National Statistics and HM Land Registry, average house prices in the UK increased by 1.2% in the year to May, down from April's rate of 1.5% and below analyst forecasts for around 1.3%.
Month-on-month, the house price index rose 0.1%, but was flat on a seasonally adjusted basis.
The lowest annual growth was in London, where prices contracted sharply, falling by 4.4% in the year to May compared to a 1.7% decline in the year to April. It is the lowest annual rate for the capital since August 2009, when it was -7.0%, and the eleventh consecutive month of declines.
The ONS said: "Over the past three years there has been a general slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England."
Mike Hardie, head of inflation at the ONS, added: "Annual house price growth remained slow but was once again strong in the north west and Wales. However, London experienced its biggest annual fall since August 2009."
Home to the country's financial centre, London - which has also long had some of the UK's most expensive real estate - has been hit particularly hard by concerns about Brexit and its potential impact on the economy.
Howard Archer, chief economic advisor to the EY ITEM Club, said: "The avoidance of a no-deal Brexit at the end of March may have provided a little support to housing market activity, by easing some of the immediate uncertainty. However, we suspect any boost to the housing market from the avoidance of a disruptive Brexit will prove limited in both size and length.
"We believe with Brexit being delayed until 31 October - and it is currently very unclear what will happen then - and the domestic UK political situation unsettled, prolonged uncertainty will weight down on the economy and hamper the housing market."
The EY ITEM Club is forecasting annual UK house price growth of 1.5% for 2019.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Prices in the capital are now 4.8% below their seasonally-adjusted peak in February 2018. The peak-to-present fall is slightly bigger in the 12 inner-most London boroughs - 5.4% - than the rest of the capital [at] 4.4%.
"Elsewhere, house prices are rising within a 1% to 3% range in most other regions.
"The downturn in London probably isn't a sign of an impending slump elsewhere, but instead reflects the slowdown in net migration, a glut of new-build flats and valuations correcting from excessively stretched levels. House price growth should recover in the second half of the year if, as we expect, lenders pass on at least some of the recent fall in wholesale funding costs to borrowers."
The ONS also released data on Wednesday showing inflation remained steady at 2% in June, in line the Bank of England's target.
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