London house prices look set to fall again this year as would-be homeowners struggle to save for a deposit.
Chartered surveys expect house prices to fall in London over the next 12 months, according to a survey released this morning by the Royal Institution of Chartered Surveyors (Rics). Last year, Nationwide recorded a 0.5 per cent decline in house prices in the capital.
Rics said that in January, buyer enquiries and home sales fell across the UK as a whole.
Savills has forecast a two per cent fall in house prices in London this year due to the cautious sentiment of buyers, and how difficult it is to save for a deposit.
Lawrence Bowles, research analyst at Savills, said: "There is limited capacity for people to get onto the housing ladder, and affordability is effectively providing a very hard cap for prices to grow at the moment.
"The median deposit in London is over £91,000. That's a lot of money to come by – it means there is a very limited pool of buyers who are able to compete in that market, and limited capacity to push prices higher."
Howard Archer, chief economic adviser at EY ITEM Club, agrees that sky-high house prices will impact the market this year. He has forecast UK house price growth of two per cent this year, but says prices in the capital may fall.
"It's very possible you could see a slight fall in house prices because obviously house price ratios in London are still very stretched; it's still very hard for people to get on the housing ladder," Archer said.
House price growth will vary by borough, however, with analysts expecting stronger growth in the outer boroughs, where prices are more affordable. Anthony Codling, equity analyst at Jefferies Bank, said in Zone 1, prices could fall by as much as five per cent, but in Zone 3 to Zone 6, prices could rise by up to three per cent.
Codling has said that a drop in transactions will temper price falls; he forecasts transaction volumes to fall by 10 per cent this year.