Key facts
- London house prices fell 3.7% to £545,000 in the year to May.
- Westminster saw a 22.8% drop in house prices, while Kensington and Chelsea experienced a 10.7% decline.
- Higher mortgage rates and stamp duty are impacting buyer affordability in London.
- Buyer enquiries are down 20% year-on-year.
- Property market activity is anticipated to rebound in the autumn.
London house prices continued their decline in May, with the average price falling by 3.7% year-on-year to £545,000, according to the Office for National Statistics (ONS). This downturn is particularly pronounced in affluent areas, with Westminster experiencing a 22.8% drop and Kensington and Chelsea seeing a 10.7% decrease. Other boroughs like Hammersmith and Camden also recorded significant price slips.
Property experts attribute the slowdown to several factors. High property values in London mean more first-time buyers are subject to stamp duty, with four in five paying the tax compared to one in ten in the North of England. Additionally, the spike in mortgage rates, exacerbated by global events, disproportionately affects London buyers who typically require larger loans. Jonathan Hopper, chief executive of Garrington, noted that increased interest rates limit borrowing capacity.
Uncertainty surrounding new Prime Minister Andy Burnham's property taxation policies is also dampening consumer confidence, according to Nathan Emerson of Propertymark. Zoopla executive director Richard Donnell pointed to a combination of factors including political change, the World Cup, a heatwave, and elevated mortgage rates contributing to a 20% year-on-year decrease in buyer enquiries and a 7% fall in agreed sales.
Despite the current slowdown, property market activity is expected to recover in the autumn once the economic outlook becomes clearer following Burnham's first budget.