Prices of homes in London’s most expensive areas are plummeting, sparking fears of a domino effect of house price falls across the United Kingdom.
The latest data from website home.co.uk showed falls in six out of ten of the U.K.’s most expensive areas, all of which are in central London.
Average sales prices fell by 8 percent in Belgravia over the 12 months ending September 2014. Over the same period, prices in Westminster dropped by 6.3 percent, in Soho by 5.7 percent, in South Kensington by 4 percent, in Chelsea by 3.5 percent and in Charing Cross by 2.7 percent.
Tightening mortgage credit in the wake of the Mortgage Market Review as well as an increase in supply are among key factors in this price drop in the capital’s most expensive, and arguably most overheated, property markets, according to the website.
House price inflation is now cooling across all of Greater London. Across the capital region, the average asking price fell by 0.1 percent between August and September, whilst average prices rose by just 0.2 percent across England and Wales. So far only the most expensive parts of London are suffering serious price deflation, but it may well spread according to the firm.
This latest trend in London’s property market follows a period of dramatic increases in house prices in the capital, fuelled by low interest rates and foreign property investment. Prime property was the first segment to recover following the credit crunch in 2007. A wave of soaring prices then moved out from prime central London as buyers refocused on less expensive areas.
The average asking prices in London rose by 9.8 percent in the last six months. Over the last year, some parts of the capital saw price rises far above the average of 19 percent for Greater London. In Stratford, the average sales price of a two-bedroom property soared by 44.9 percent in the 12 months ending September 2014, while in West Norwood the same property type saw a price rise of 44.2 percent over the same period.
Doug Shepherd, Director of Home.co.uk, said: “Overall, it’s been a simply staggering year for property prices in London. Some areas have far exceeded the 19 percent rise overall for Greater London, whilst others have underperformed relative to this figure.
“The list of the top five locations revealed some jaw-dropping gains. Moreover, it is highly likely that many owner-occupiers in these locations earned less than their homes did over the course of the last year.
“However, when prices rise at an unsustainable rate, boom can quickly turn to bust. Prime London prices are falling and the middle-income areas that have seen the biggest price hikes this year are likely to suffer the same fate.”
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
