It’s official: London’s crazy house prices are stalling after decades of runaway growth

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Houses in Notting Hill, London

LONDON — After decades of runaway growth, London’s housing market is finally grinding to a halt, according to government figures published on Tuesday.

The average London house price fell by 1.5% in March to £471,742, according to the Office for National Statistics. The 1.5% fall equates to an annual growth rate of just 1.5%.

The ONS figures are the latest indication that one of the greatest asset run-ups in British history is reaching a standstill.

Only a year ago, London house prices were rising by nearly 15% a year, and at their peak in 2000, prices were rising by 28.3% annually.

London prices have been affected by a number of factors including stagnant wage growth, Brexit-related uncertainty, a volatile sterling, and stretched valuations.

ONS

‘It’s very hard to see central London prices recovering’

The slowdown isn’t just confined to London though. The average UK house price fell by 0.6% in March to £215,848, equating to an annual growth rate of 4.2%. Prices fell in every region except for Wales, where prices grew by 1.4%, and the West Midlands, up by 0.3%.

Samuel Tombs, chief economist at Pantheon Macroeconomics, said in a note on Tuesday: “It’s now abundantly clear that the [UK] housing market is in its softest patch for several years.”

He said the slowdown in the capital has been concentrated in inner London, where prices were up just 1% year-on-year, while prices in outer London rose at a similar rate to the rest of the UK (5% and 4.2% respectively).

He said: “Looking ahead, it’s very hard to see growth in central London prices recovering, given that valuations look stretched, the financial sector is facing an uncertain post-Brexit future and volatility in sterling is undermining property’s safe-haven appeal for overseas investors.

“Across the rest of the UK, house price growth looks set to remain dampened by sluggish growth in wages. As such, we still expect year-over-year growth in national prices to slow to just 2% by the end of this year.”

Jonathan Hopper, managing director of Garrington Property Finders, said: “London finds itself in a position it is unaccustomed to – close to the bottom of the pile.”

“The chronic shortage of supply is still propping up prices in many areas and mitigating the slowdown. But this snapshot of a slowing market – taken before the election announcement – confirms what many in the industry had feared.”

More from Thomas Colson:

• May’s post-Brexit immigration policy could make it difficult for the UK to fill key roles in the food industry
• The 13 richest people in Scotland
• Houses now cost up to 17 times the average salary in London
• Britain’s most famous fund manager is bullish on Brexit and thinks ‘investors have become far too pessimistic about the UK economy’
• Britain’s builders are shaking off Brexit uncertainty and reporting booming demand

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