Falling London house prices have helped drag annual growth in UK property values down to a five-year-low, according to official figures.
House prices in London fell by 0.7% annually in July – the biggest tumble there since September 2009 when there was a 3.2% decline, according to
figures released jointly by the Office for National Statistics (ONS), the Land Registry and other bodies.
The report said London has shown a general slowdown in its annual property price growth rate since mid-2016 – hitting a recent peak of 14.8% in March that year.
Across the UK, house prices increased by 3.1% in the year to July – the lowest annual growth rate since August 2013. The average UK house price stood at £231,000 in July.
The report said the slowdown in UK house price growth over the past two years has been driven mainly by a slowdown in the south and east of England.
Price declines in London have particularly hit the value of flats – with the city accounting for around a quarter (25%) of all UK sales of flats and maisonettes.
The average price of flats and maisonettes crept up by 0.6% in the year to July 2018, to £208,000 on average – the weakest growth of all property types looked at in the report.
By comparison, the price of detached houses was up by 4.6% annually.
Across England, house prices have increased by 3% annually, reaching £249,000 on average.
Within England, the North West showed the highest annual growth, with prices increasing by 5.6% in the year to July 2018. This was followed by the South West and West Midlands regions (both 4.4%).
The lowest annual growth was in London, followed by the South East, where prices increased by 1.8% in the year to July 2018, followed by the East of England, where prices increased by 2.4%.
The report said: “This is the first time since May 2009 that London, the South East and the East of England have been the lowest-ranked regions for annual growth.”
Wales saw house prices increase by 4.2% over the previous 12 months to stand at £157,000.
In Scotland, average house prices increased by 3.2% over the year to July to reach £152,000.
The average price in Northern Ireland was £133,000, up 4.4% over the year.
Earlier this week, property website Rightmove said it has recently seen some signs of confidence returning to the London market, particularly at the higher end where price reductions are helping to pull more buyers in.
Releasing its housing market report for September, Rightmove said there are signs that price reductions in parts of London have led to an upturn in buyer activity as sentiment improves.
Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said the ONS/Land Registry figures “reflect the market as it was in the summer months – since buyers and sellers have returned from their summer breaks, there has been a little more enthusiasm to sell homes than we have seen for a while.
“This is the time of year when we would expect to have more activity and on the ground we are certainly seeing more property coming onto the market and more demand. But it is still hard to gain commitment from buyers because property needs to differentiate itself from the competition in order to attract interest and offers.”
Dan Tomlinson, policy analyst at the Resolution Foundation, said: “The UK’s housing market shows some signs of cooling, with growth in the house price index slowing to its lowest level since 2013. But we should be cautious about thinking this signals an imminent easing of cost of living pressures.
“This slowdown is driven almost entirely by trends in London and the South East.
“House price rises are still outpacing wage growth across many other parts of the country.”