Year-on-year house prices in the capital have dropped for the first time in eight years, according to Nationwide's latest house price index.
Prices in the capital dropped to an average price of £471,761 this month, down 0.6 per cent compared with September last year. That makes London the weakest performing region for the first time since 2005.
Across the UK as a whole, annual house prices rose two per cent to an average of £210,116. The rate of growth was broadly stable compared with the 2.1 per cent recorded in August.
How London became the weakest performing region:
|Average price (Q3 2017)||Annual % change this quarter||Annual % change last quarter|
|East Midlands||£177,825||5.1 per cent||4.1 per cent|
|South West||£240,832||4.8 per cent||4.4 per cent|
|West Midlands||£183,018||4.6 per cent||3.6 per cent|
|Outer SE||£277,519||3.9 per cent||3.5 per cent|
|East Anglia||£222,080||3.9 per cent||5 per cent|
|North West||£156,193||2.8 per cent||4.1 per cent|
|Wales||£149,970||2.6 per cent||1.4 per cent|
|North||£127,213||2.5 per cent||1.1 per cent|
|N Ireland||£133,659||2.4 per cent||3.8 per cent|
|Outer Met||£365,584||2.1 per cent||2.1 per cent|
|Scotland||£146,022||1.9 per cent||1.7 per cent|
|Yorks & H||£151,482||0.4 per cent||2.3 per cent|
|London||£471,761||-0.6 per cent||1.2 per cent|
Robert Gardner, Nationwide's chief economist, said:
House price growth rates across the UK have converged in recent quarters. Annual growth rates in the south of England have moderated towards those prevailing in the rest of the country.
London has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years, albeit by a modest 0.6 per cent. Consequently, London was the weakest performing region for the first time since 2005.
Gardner added: "Housing market activity, as measured by the number of housing transactions and mortgage approvals, has strengthened a little in recent months, though remains relatively subdued by historic standards.
“Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appear to be weighing on confidence. The lack of homes on the market is providing ongoing support to prices."
London's housing bubble risk
Looking ahead at the impact of a potential interest rate rise, the Bank of England's monetary policy committee signalled in its meeting this month that if the economy develops broadly in line with expectations, a hike is likely in the coming months.
Gardner said most economists think a small rise of 0.25 per cent is likely at the next MPC meeting in November, taking the bank rate back to 0.5 per cent.
He said the impact on UK households of a small rise in interest rates is "likely to be modest", as the proportion of borrowers directly impacted will be smaller than in the past.