London house prices fall at fastest rate since 2009
UK house prices fell for a third month in a row, with properties in London and the South East feeling the most pressure.
According to the Halifax House Price Index, the average house price fell by 0.1% from the previous month, bringing the average house price down to £285,932. This represents an overall decline in house prices of 2.6 per cent over the past year.
London stocks have also fallen 2.6% over the past year, with average house prices down £15,000. It was the worst performance since October 2009 and brought the average London house price to £533,057.
The south of England faces the greatest “downward pressure”. The Southeast fell 3 percent, its worst performance since July 2011.
The West Midlands actually rose by 1.5%, while Yorkshire also posted marginal growth.
Halifax Mortgage Director Kim Kinnaid said: “The annual decline of -2.6% (-£7,500) is the largest year-on-year decline since June 2011. Volatility, this rate of decline largely reflects the impact of last summer’s historically high home prices.”
The housing market has been hit by rising interest rates. The Bank of England raised interest rates 13 times in a row, raising the benchmark interest rate to 5%.
However, inflation remains stubbornly high, suggesting the bank will have to raise it a few more times to regain control.
As Chennaid points out, “Fears of ongoing inflation have led to a sharp rise in the cost of funding. Combined with a further £50 increase in the base rate, this has contributed to a sharp increase in typical mortgage rates over the past month.”
The average cost of a two-year fixed mortgage deal rose to 6.52%, according to The Economist. Earlier this year, the five-year average traded above 6% for the first time.
Other surveys showed the housing market was softening due to tighter credit conditions, but not as quickly as some economists had predicted.
National house prices rose 0.1% in real terms last week, with some economists predicting they could fall as much as 10%.
Despite the drop in prices, Chesterton sales director Matt Thompson said there was still interest from buyers as rents were also continuing to rise.
“We are seeing more and more cash buyers who would rather buy before facing the possibility of another rise in interest rates, and as tenants are facing rising rents, many are reviewing their situation and concluding that despite rising interest rates, buying Still an economically attractive option,” he said.