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£28,000 knocked off house prices by banks crisis
Mira Bar-Hillel, Property Correspondent17 Dec 2007
Property asking prices in London plunged by an average of £28,000 in the wake of the Northern Rock crisis, new figures show.
The average price slumped 6.8 per cent, from £412,731 to £384,632, between last month and this month.
The figures, compiled by estate agency website Rightmove, show prices are still higher than a year ago, but only by 8.3 per cent.
The monthly fall has affected all 32 London boroughs and provides the starkest evidence yet that the credit crunch and consumer downturn is hurting the property market. Experts now predict the borrowing squeeze will cause London prices to fall by three per cent next year and in 2009.
Analyst Howard Archer, of Global Insight, said: "We have already seen a significant drop in mortgage lending and in buyers approaching estate agents. The average time it takes to sell a house is the longest for two years, and the number of mortgages offered in October was the lowest for almost three years. Sellers have had to accept offers well below the asking prices, so it is hardly surprising that they have finally seen the need to lower the asking prices."
Although the price fall is dramatic, Rightmove said it had been exaggerated by the timing of the last phase of the introduction of home information packs.
It says a third of the drop was due to a greater number of smaller properties being put on the market last month, to get ahead of the introduction of home packs for all houses, which took place on Friday.
Miles Shipside of Rightmove said: "We calculate that the one-off surge in the least expensive properties was responsible for 2.3 percentage points of the fall. However, even allowing for that, the price fall is by far the biggest we have seen at this traditionally quiet time of the year.
"It is normal that only fairly desperate sellers are active just before Christmas and prices are always reduced accordingly. But the size of the reductions this December is further confirmation of sellers having to readjust prices downwards."
The biggest percentage falls were in Hackney (10.2 per cent), Tower Hamlets (9.6 per cent), and Southwark (8.3 per cent).
In cash terms, the largest drops were in Kensington and Chelsea (about £80,000), Westminster (£50,000), Hackney (£48,000) and Islington (£45,000).
| Borough | Dec-07 | Nov-07 | Monthly change (%) | Monthly change (value) |
| Barking and Dagenham | £227,145 | £236,284 | -3.90% | -£9,139 |
| Barnet | £446,691 | £463,253 | -3.60% | -£16,562 |
| Bexley | £219,375 | £231,446 | -5.20% | -£12,071 |
| Brent | £511,860 | £526,634 | -2.80% | -£14,774 |
| Bromley | £322,489 | £341,688 | -5.60% | -£19,199 |
| Camden | £668,752 | £697,166 | -4.10% | -£28,414 |
| City of Westminster | £943,587 | £994,306 | -5.10% | -£50,719 |
| Croydon | £276,942 | £289,595 | -4.40% | -£12,653 |
Ealing | £385,417 | £410,860 | -6.20% | -£25,443 |
| Enfield | £318,805 | £330,263 | -3.50% | -£11,457 |
| Greenwich | £245,789 | £261,264 | -5.90% | £-15,475 |
| Hackney | £425,007 | £473,377 | -10.20% | -£48,370 |
| Hammersmith and Fulham | £672,121 | £699,743 | -3.90% | -£27,621 |
| Haringey | £388,708 | £402,589 | -3.40% | -£13,881 |
| Harrow | £322,089 | £336,152 | -4.20% | -£14,062 |
| Havering | £261,242 | £269,384 | -3.00% | -£8,142 |
| Hillingdon | £337,416 | £357,258 | -5.60% | -£19,841 |
| Hounslow | £441,201 | £461,711 | -4.40% | -£20,511 |
| Islington | £492,951 | £538,099 | -8.40% | -£45,147 |
| Kensington and Chelsea | £1,572,814 | £1,653,696 | -4.90% | -£80,882 |
| Kingston-upon-Thames | £483,285 | £518,246 | -6.70% | -£34,961 |
| Lambeth | £371,743 | £397,970 | -6.60% | -£26,227 |
| Lewisham | £318,463 | £338,249 | -5.80% | -£19,787 |
| Merton | £377,225 | £408,564 | -7.70% | -£31,339 |
| Newham | £251,674 | £265,407 | -5.20% | -£13,733 |
| Redbridge | £291,176 | £301,675 | -3.50% | -£10,499 |
| Richmond-upon-Thames | £530,284 | £557,451 | -4.90% | -£27,167 |
| Southwark | £349,208 | £380,873 | -8.30% | -£31,665 |
| Sutton | £335,808 | £358,119 | -6.20% | -£22,312 |
| Tower Hamlets | £395,034 | £436,880 | -9.60% | -£41,845 |
| WalthamForest | £294,311 | £309,866 | -5.00% | -£15,555 |
| Wandsworth | £468,072 | £505,349 | -7.40% | -£37,277 |
| GREATER LONDON | £384,632 | £412,731 | -6.80% | -£28,099 |
Reader views (9)
First VIs said this is a small island so prices cannot fall anywhere (ignoring that we have built on less than 20% of it), and they did. Then VIs said prices could not fall in cities owing to planning restrictions, and they did. Then VIs said prices could not fall in London because it was the centre of the world, shortages, planning restrictions, no land, booming economy etc, but they did. Now they will say it cannot happen to housing (only flats), but it will.
I know that the composition of this month's Rightmove index is distorted by HIPS i.e. the proportion of cheaper properties in this month's sample is higher than usual so average prices look low. But, as Rightmove said, only part of this could explain the 6.8% drop. Moreover, the general trend is clear for London and everywhere. If prices had been driven by genuine shortages then prices would continue rising regardless of liquidity falling? Finally, it comes to the truth, prices are driven by liquidity. Prices had peaked already (multiples could not be higher and deposits could not be lower), but the current crunch has highlighted the liquidity issue even more.
For the smug BTLers. If you have a £1m property portfolio with 25% equity, a 10% fall in your portfolio is actually 100k of 250k i.e. a 40% fall. Not a 10% fall on £1m. Goodluck. Everyone else, this only helps you (less debt required next time).
- Raj, London, 18/12/2007 22:29
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Richard from Hampton, perhaps not, but at least buyers if paying the asking price, on average, are paying 6.8% less.
This is a good thing. Eventually housing will be affordable and more people's money will go into pensions and spending on the high street with their wage money - not borrowed on credit.
- Kev, London, 17/12/2007 21:08
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The party is over, chaps.
- Martin Emery, Taunton UK, 17/12/2007 18:23
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It's great news, let's hope these over inflated prices come down so normal people can get on the housing ladder.
As for all this HIPs stuff which right move mention its rubbish. Why drop your house price by thousands when you can buy a hip for £300. It's far more likely that banks aren't lending stupid money anymore and people realise how over inflated homes are.
- Gavin, London, 17/12/2007 16:13
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I saw this coming! Back in August 2007 when I placed my one bedroom house on the market. My intention was to move to a bigger house (two bedroom) on my same street (London, zone 4). But the prices were so over-inflated, I used my common sense and found these prices unrealistic! The only way I could afford to move up is to put a 40% depost and borrow 6 times my income, paying the bank an average of £1050 a month to service the debt but the same agent was advertising for rent for an identical house on same street for £800. I told the agent this is madness! Sold the house, rented, and the money I made from my old house generates me a £350/month in interest. I live in a two bedroom paying only £450 a month! I make so much that i now top up my private pension an additional £400 a month and am waiting to see where the market goes from here. Those who can still do it, check rental options in your area first!
- Dr Fadi, London, 17/12/2007 16:09
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Great news for first time buyers, key workers, etc.
Bad news for Estate Agents!
- Jon, London, 17/12/2007 14:54
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The long awaited house price crash has commenced. A chance for the next generation to own their own home in a few years time is in site. Great news for everyone under 30 I should think, unless you believed all the estate agents and banks that told you property prices only ever go up and have tied yourself to an overpriced flat for the next 10-15 years of negative equity.
- Richard, Hampton Wick, Surrey, 17/12/2007 14:18
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What are these statistics? Has anyone actually been forced to sell a property for an amount less than they paid?
- Bj, London, England, 17/12/2007 13:14
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I'm so glad we didn't buy this summer and decided to rent for another six months. I may well rent for a further six months because things aren't going to be any better next year if you are trying to sell.
- Margie, Merton, 17/12/2007 13:09
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