Thursday, February 9, 2023

House prices in central London fell by a quarter over five years

Must Read

Property prices in central London have fallen by 24 per cent in real terms over the past five years, according to research underlining the effects of the pandemic on demand in city centres and a housing affordability crunch in expensive areas of the country.

Zoopla’s house price index for December found prices in London’s WC postcodes had dropped in nominal terms by 7 per cent since 2017, while those in EC postcodes fell by 2 per cent. Taking inflation into account across both central zones leaves prices one quarter down in real terms.

The trend is set to continue next year, researchers at the property website said. Prices in the capital were likely to fall between 5 and 8 per cent, compared with the 5 per cent forecast across the UK, it said. 

Richard Donnell, executive director at Zoopla, said: “Higher mortgage rates hit hardest where house prices are highest, so London will suffer to an above average degree in 2023.”

Housing demand has halved this year, Zoopla said, as activity in the first half of the year dropped off in the second half, when mortgage rates shot up in the market turmoil following the government’s September “mini” Budget. When measuring demand, Zoopla counts would-be buyers contacting agents about specific homes, rather than users of its website browsing properties. 

“We expect buyers to return to the market in the new year, but they will be far more cautious and price sensitive,” Donnell said. 

A bleak outlook for the economy, higher interest rates and unemployment has led other housing market economists to warn of falling house prices. Capital Economics, for instance, forecasts prices will fall across the UK by 8.5 per cent in 2023, with a further drop of 2.5 per cent in 2024. Halifax forecasts a decline of 8 per cent while Nationwide this week predicted a drop of 5 per cent. 

However Donnell added that several factors suggested more significant falls were unlikely, including more rigorous affordability testing among mortgage lenders over the past decade and forbearance for those going into arrears as higher interest rates pushed up lenders’ profits.

“Banks are going to make a lot of money in the next 12 months and they’re supporting their current mortgage customers,” he said. 

Looking back over the past five years, the research found prices had risen fastest in lower-priced areas in the Midlands and northern England, with a jump of 47 per cent in Oldham, and 42 per cent in Bolton and Wolverhampton since 2017.

Zoopla expects several trends of the past few years to go into reverse as buyers become more selective and negotiate harder as pressure mounts on their income and appetite for risk. 

It found evidence that the pandemic-fuelled trend for people to move out of urban areas to coastal or rural homes had already “run out of steam”. Coastal locations of east Kent, Torquay and Portsmouth and wider areas of the Lake District and mid-Wales showed a larger than average slowdown in prices over this year. All were hotspots for buyers during lockdown.

Helen Morrissey, senior pensions and retirement analyst at investment platform Hargreaves Lansdown, said the research showed affordability would be key to determining the course of the market next year. “Though rural and coastal areas are seeing demand fall, there is demand for more affordable urban areas such as Milton Keynes, Bradford and Coventry as people become increasingly office-based again.”

The price differential between flats and houses accelerated in the pandemic as people sought more spacious properties and worries over flats were heightened by problems with cladding and leasehold charges. The average house price is 2.1 times flat prices, a 20-year high. 

But Donnell expects a resurgence in demand for flats in 2023 as buyers seek better value for money and any problems with flats affected by cladding issues — only a small proportion of the total — are eased by changes in government and lender policies.

Numisteamone

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest News

West Brom: Karlan Grant to get last chance

West Bromwich Albion continued their fine run at the weekend,...

More Articles Like This