London house prices were the worst performing in the UK over the last year, according to the latest figures from the Office for National Statistics (ONS).
The ONS House Price Index, compiled in conjunction with the Land Registry, showed that house prices in the capital decreased by 0.7 per cent over the last year.
This is the biggest drop in London since 2009, the ONS said, when it hit negative 3.2 per cent.
The ONS said that London has shown a general slowdown in its annual growth rate since mid-2016.
The fall in London prices is due largely to a steep fall in demand relative to supply, according to ONS analysis, and it may actually balance out prices in the capital to make buying a home more accessible.
The reasons behind this drop in demand for property in London range from the increased Stamp Duty levy to reductions in mortgage interest relief, as well as Brexit, which may have reduced the appeal for overseas buyers, the ONS said.
“With the referendum and subsequent uncertainty regarding Britain’s political and economic environment, perceptions of the future value of London property have been adversely affected,” said the ONS.
“This is what you might call a fall in ‘speculative demand.”
Jonathan Hopper, managing director of Garrington Property Finders says that London is “paying a painfully high price for its stellar run of price rises, and a correction is now underway in several parts of the capital.
“While London contains a tapestry of micro markets – variously going up, down and sideways – the headline figure is a wake-up call for both sellers and buyers.”
But despite London’s disappointing price growth, Lucy Pendleton, founder and director of independent London estate agents James Pendleton, says the cooling prices may benefit buyers.
“London hasn't got its head in its hands,” she said. “In fact the capital is ahead of the game in making much needed adjustments to maintain demand and that’s no bad thing in the long term.
“Affordability problems have been driving down sales volumes and these remain subdued. They fell massively according to last month’s bulletin and are still sliding heavily on an annual basis.
“Nationally, buyers and sellers are going to have to make up their minds pretty soon which way the market needs to move. When that happens, the capital will be seen to have led the pack as it typically always does.”
London continued to be the region with the highest average house price at £472,000, followed by the south east and the east of England, which stood at £321,000 and £291,000 respectively.