Market slowdown:UK inflation rises as London house prices record biggest fall since 2009
House prices in London have seen the biggest fall in nine years while UK inflation has edged up for the first time since November.
Figures released today show a dip of 0.7 per cent in the year to June — the largest drop since 2009 when prices fell by 3.2 per cent —taking the average cost of buying a London home to £476,752.
While average prices are now £2,100 lower than a month ago, a recent report reveals first-time buyers in London need to raise eye-watering deposits of £115,00 in order to get on to the property ladder. This deposit alone is enough to buy an entire house in some parts of the country.
The report for the year to June indicates a fall in house prices for the fifth consecutive month, however the ONS has revised the annual data relating to London due to delays in the registration of some property sales.
Jamie Durham, an economist at PwC, says: “This means that house price growth in London over the last year has been higher than we previously thought. The most interesting result of this is that price growth was actually positive in February and April, while the previous release suggested that prices had declined for four consecutive months.”
“House price growth is still faltering in the capital, with negative annual growth in May and June, but not at the rate we previously thought,” says Durham.
The latest UK Economic Outlook report by PwC forecasts house prices in London to fall by an average of 1.7 per cent in 2018, and 0.2 per cent in 2019, “before becoming positive again after that.”
London remains the weakest region for growth as house prices across the UK rose by three per cent in a year to £228,384, but this is still the lowest rate of annual growth since August 2013.
INFLATION EDGES UP AS INTEREST RATES RISE
The 0.1 per cent rise in inflation to 2.5 per cent in July was forecasted and is expected to continue to restrict wage growth and consumer spending over the next 12 to 18 months.
The Bank of England has indicated inflation should drop to just above two per cent by 2020 as interest rates are slowly raised.
Earlier this month, the Bank of England voted unanimously to raise UK interest rates to their highest level in almost 10 years.
The decision to raise the base rate to 0.75 per cent from 0.5 per cent pushes the Bank rate to its highest level since March 2009. Two more rate rises are expected in 2019 and 2020.
ARE HOUSE PRICES GOING UP ANYWHERE IN LONDON?
Fifteen of the capital’s 33 boroughs have recorded positive growth, albeit far below the stratospheric double-digit rises of previous years.
The best-performing boroughs include Havering on the eastern edge of the capital, with an annual rise of 6.1 per cent taking average property prices in the borough to £376,396. Islington has also seen positive growth of 5.9 per cent to £704,791.
Barking and Dagenham also recorded growth of four per cent and remains the cheapest London area for home buyers. Huge regeneration is underway across the borough, with a masterplan for 50,000 new homes alongside riverside shops and offices. Property prices here are still hovering around £300,000 despite steady annual growth.
The biggest falls in house prices were recorded in the capital’s most expensive boroughs, including the City of London (-23.8%), which the ONS attributes to a low number of property sales, Kensington and Chelsea (-13.9%) and the City of Westminster (-12.1%).