London’s housing market is at a critical point, new figures have revealed, with heavy discounting by homeowners desperate to sell their properties tipping the capital into a buyer’s market.
The average home in London is now sold at 4% below its original asking price, up from just 0.5% in 2014, the closely-watched Hometrack Cities Index showed. In some parts of the capital, discounting has risen as high as 10%.
The figures suggested a widening gap between house price growth in London, which reached just 1.8% between December 2016 and December 2017, and the rest of the UK, where growth was 4.4%.
And while growth in the UK’s 20 largest cities hit 5.4% during the same period, three areas experienced slower house price growth than the capital. In Oxford, Cambridge and Aberdeen, prices fell 0.9%, 1.4% and 9.9% respectively.
By contrast, discounting by sellers in the UK’s largest regional cities is declining: in Birmingham and Manchester, the average price reduction has fallen from 6% in 2013 to 2.7% last year.
“These results confirm our view that the housing market is following the pattern registered in previous housing cycles with high rates of growth in London over the first half of the cycle being followed by low growth and an acceleration in regional housing markets as prices recover off a low base, we appear to be at this transition period once again.” said Richard Donnell, insight director at Hometrack.
Five more years
Lucian Cook, head of residential research at Savills, said subdued growth in the capital is likely to continue until 2022 thanks to tighter rules on mortgage lending and a hike to stamp duty on high-end homes.
Richard Donnell also added, “We’re forecasting that prices in London only increase by a net figure of seven% over the next five years, whereas in the UK we think it’s going to be twice that figure, at 14.2%.”
Tom Bill, head of residential research at Knight Frank, added that political factors may also be taking their toll on the market. “We’ve had two stamp duty increases but we’ve also had two general elections and an EU referendum,” he said.
“The political uncertainty does have an impact. Vendors are still, in some areas, realising where the market is and understanding the need to drop asking prices.”
Earlier this month figures from the Land Registry showed asking prices in the capital had taken a dive, falling 2.3% in the year to November.