31 Dec Is the London property market cooling?
The end of 2022 has seen house prices falling at their fastest since the financial crisis began, prompting fears of a cooling in the London property market.
Property values across Britain plunged in the wage of Kwasi Kwarteng’s short-lived mini-budget.
November saw the biggest decline since October 2008 and the third drop in as many months, according to data from Halifax, the largest mortgage lender in Britain. The Halifax figures show a decline of 2.3 per cent on the average British home price.
Growth falls
The data also revealed that the annual growth rate also halved in November, from to 4.7 per cent from 8.2 percent. This is expected to worsen as early next year is predicted to see negative figures.
In London, the growth rate slowed to 5.2 per cent in November compared to 6.6 per cent, indicative of a rapidly cooling market. Agents in the Capital are also warning of more price drops in 2023.
In contrast, prices were rising by as much as 8.6 per cent in August, demonstrating how much the market has changed in London in a relatively short period of time.
Impact on the London market
Some movers in London have put off transactions in the Capital due to affordability pressures and it is thought that many homebuyers are waiting for the market to settle.
The market in London and beyond has undoubtedly been affected by the mini-budget, which prompted mortgage deals to be withdrawn and rates to shoot up. Average fixed rates over five years grew to 6.5 per cent in October, compared to 4.75 on mini-budget day. At the start of December, they were around 5.8 per cent.
London price crash
Comparisons are being made with the winter between 2008 and 2009 when London house prices went down by around 16 per cent. They did start to bounce back in the spring of 2009, however, as the Bank of England cut interest rates to a record low of 0.25 per cent. Read more about Bank of England interest rates.
Following this, prices rose sharply and this has continued for many years, with the average London price being paid by homebuyers working with even the best conveyancing solicitors London standing at more than £544,000, according to figures from the Land Registry.
Anthony Codling, property platform Twindig’s chief executive, said that further price falls were unlikely to be as significant as at the end of 2022 but still predicted a ‘choppy’ few months until mortgage rates stabilise and inflation falls.
Mayfair estate Agency Oliver James’ director Oliver Fish said that buyers were currently waiting to see what happens in uncertain times. He said that this was understandable due to the turmoil prompted by the mini-budget and interest rate rises. He added that the cautious approach of buyers was causing sellers who want or need to move fast to reduce asking prices to secure a sale. This means that many buyers are still seeking the services of companies such as Sam Conveyancing to complete transactions.
Fish predicted that property prices will drop by another two to three per cent within the central London area over the next year. As a note of optimism, he did state that they are expected to rise again as people adapt to higher costs associated with borrowing.