London house prices drop at the fastest pace in almost a decade

London house prices are falling at the fastest pace since the depths of the recession almost a decade ago, with the capital’s most expensive areas seeing the biggest declines.

Average prices fell to £593,396 ($820,000) in January, an annual decline of 2.6 per cent, according to a report published by Acadata on Monday. That's the most since August 2009.

The city will be the weakest performing market in the country over the next five years, said Lucian Cook, head of residential research at broker Savills Plc, as a decade of soaring prices means London’s more exposed to political and economic uncertainty, the prospect of interest rate increases and mortgage loan limits.

Weakness in prime property in the UK capital in recent years – partly due to tax changes – is rippling out to other locations in the city and around the Southeast. London prices fell 0.8 per cent in January alone, according to Acadata, which publishes detailed regional data with a one-month lag. That shows the weakness that was present for much of last year continued into 2018.

Business has been slow in “a lot” of offices since the start of the year, though there are more deals being done in some central outlets, Simon Aldous, a director at Savills, said in a survey published last week by the Royal Institution of Chartered Surveyors. Offers for homes are often more than 10 per cent below asking prices, James Gubbins, a partner at Dauntons in Pimlico, said in the poll.

“Uncertainty over Brexit is the issue,” Gubbins said.

London’s highest-priced boroughs were the biggest losers over the last year, while the largest single drop was recorded in Wandsworth, down almost 15 per cent. The borough has seen a sharp surge in the number of expensive apartments being built there that Londoners don’t want or can’t afford.

______________

Read more:

UK's turbulent year draws to a close with little to cheer

UK launches post-Brexit industrial strategy

______________

Increased taxes on landlords and loan limits in Singapore have also helped to damp demand from overseas, leading to a record number of homes under construction in the UK capital that have yet to find a buyer.

Nationally, slower economic growth and faster inflation since the Brexit vote are weighing on the market, while the Bank of England is raising interest rates, adding to the downward pressure.

Media coverage of the slowdown, including headlines about falling house prices, is making consumers nervous and holding back demand. New buyers registering with real-estate agents fell for an 11th month in February, RICS said last week.

Hedge funds are again raising their shorts against home builders as sentiment changes. Firms including Millennium and Marshall Wace have increased wagers against companies such as Bovis Homes Group Plc, Taylor Wimpey Plc and Berkeley Group Holdings Plc in recent weeks.

Read more about hedge funds raising their short bets against home builders

The capital dragged down nationwide growth in February to 0.5 per cent. Even excluding London and the southeast, the 2.5 per cent annual rate of increase in January remained well short of the pace seen in recent years.

The housing slump may also be weighing on consumer spending, which fell for the ninth month in 10 in February, according to a separate report by Visa. Households spent the least on recreation since 2010.