The latest house price index from the Office for National Statistics has revealed that house prices in the capital dropped by 0.7% in the 12 months to March.
It was the only region to see house prices fall over that period, according to the data.
Overall, average house prices in the UK increased by 4.2% in the year, a figure unchanged from February, with the typical property worth £224,000. This is up £9,000 from the same time last year.
While London struggled, other regions saw house prices rise substantially. In the East of England, for example, prices grew by 5.8%, while the East Midlands saw a jump of 5.6%. The North East saw the smallest growth at 2.1%.
Ishaan Malhi, chief executive officer of online mortgage broker, Trussle, noted that with house prices still rising faster than wages it is making the prospect of homeownership “increasingly tricky” for first-time buyers.
He continued: “On average, a year’s take home pay is little over 50% of the average first-time buyer deposit. For younger people, the situation is especially tough.”
Lucy Pendleton, director of London estate agents, James Pendleton, said that the situation is not as negative as it may appear for the capital, arguing the city is “ahead of the game in making much needed adjustments to maintain demand”.
She added: “Outside London, only the North East is being buffeted by inflation. Prices being achieved across the rest of the country still betray a housing market in relatively rude health. Looking at the numbers it’s less a case of a two-speed housing market, and more a case of pick any speed you like.”
However, Jonathan Samuels, chief executive officer of Octane Capital, said that the capital was a “victim of its own extraordinary success”, with a fundamental rebalancing of the housing market now taking place.
He said: “Low stock levels and continued cheap borrowing rates are preventing prices from falling while economic weakness and political uncertainty ahead of Brexit are seeing many households err on the side of caution.
“For the rest of 2018 and perhaps well into next year, the property market will likely mirror the economy, lacking any real momentum and simply idling along.”
Source: Your Money