London house prices drop again as market faces fresh headwinds
House prices in London have fallen for the sixth consecutive month, as the capital’s property market continues to struggle compared to the rest of the country.
The average house price in the capital fell by 1.7 per cent in the year to January, up from the 1.2 per cent year-on-year fall in December, according to the Office for National Statistics (ONS).
Property experts said the country’s housing market began the year on a weak footing, with inflation fears caused by the Iran war set to further dampen housebuilding and buyer confidence.
In the UK as a whole, annual house price growth slowed to 1.3 per cent – down from 1.9 per cent to December – as prices fell 0.3 per cent month by month.
House prices grew the most (3.1 per cent) in the North West in the year to January, while the South East (-0.5 per cent) and South West (-0.1 per cent) followed London with falls in average asking prices.
Average rents increased by 3.5 per cent across the UK in the year to February, unchanged from the twelve months to January.
London saw the smallest rise in average rents (1.7 per cent), while rental costs grew the most in the North East (7.6 per cent) and the North West (5.7 per cent).
Though the ONS’ figures predate the impact of the Iran war on property confidence, experts say the market’s shaky start to the year has left it vulnerable to the knock-on effects of the conflict.
Housing market faces ‘further headwinds’
Paige Tao, economist at PwC, said: “Further headwinds are building. Today’s figures come with an important caveat that they only capture activity up to January and do not yet reflect the impact of the Middle East tensions.
“Higher energy prices are adding to inflationary pressures, prompting markets to scale back expectations of Bank of England rate cuts.”
The outbreak of war in Iran has shocked mortgage lenders, with banks pulling deals at the fastest rate since Liz Truss’ mini-budget in 2022.
Property experts say this risks worsening the already gloomy prospects for Brits hoping to get on the housing ladder.
Nathan Emerson, chief executive of estate agent trade body Propertymark, said: “We have witnessed a substantial number of mortgage products, some that previously offered sub 4% rates, now being withdrawn, leaving consumers with fewer choices and generally a tighter eligibility criteria to achieve, something that has the potential to impact first-time buyers especially.”
More than 50 leading organisations in the housebuilding sector are calling on the government to address housing affordability.
These bodies have produced a report proposing that the government writes off graduates’ student debt in exchange for housing equity, and are due to meet ministers to discuss their full proposals this week.