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'Boom over' as inflation outstrips house prices
Mira Bar-Hillel, Property Correspondent25 Feb 2008
House prices are beginning to slip behind the rate of inflation after five months of stagnation.
Prices in six London boroughs have risen by less than inflation over the last 12 months - further evidence that the 10-year property price boom is over.
The six boroughs are Waltham Forest, Havering, Redbridge, Southwark, Greenwich and Lambeth.
Across London, the average increase in house prices was 4.2 per cent year on year, while general inflation stands at 2.2 per cent. This time last year, prices were rising at a rate of 13 per cent. Today's data, from house price monitor Hometrack,also found:
The biggest loser has been Waltham Forest, where property prices rose only 0.9 per cent in a year, to an average of £222,200.
Prices in Lambeth and Greenwich rose only 1.2 per cent - to £284,700 and £197,500 respectively
The best performer was Merton, where prices rose 7.7 per cent to £351,600. Other winners were Camden (6.5 per cent) and Hammersmith and Fulham (6.1 per cent).
The highest prices in London are in Kensington and Chelsea where the average home costs £726,400. The cheapest are in Barking and Dagenham, at £158,600.
Over the last month prices have fallen 0.2 per cent on average. No borough saw an increase.
Hometrack's director of research, Richard Donnell, said the prices were falling because of a 45 per cent reduction in the number of buyers.
But he added the trend could reverse following cuts in interest rates: "A small if growing number of buyers appear ready to dip their toes in the market again but any upward pressure on prices is likely to remain limited for the foreseeable future," he said.
Cass Business School fellow Peter Hahn said: "Mortgages have been too cheap for too long and now we are seeing the opposite: loans are harder to come by and more expensive. That means lower house prices. My advice for people is this: don't buy property now. Wait until prices come down this year."
Ed Mead, of agents Douglas & Gordon, said sellers were becoming more realistic. "Some buyers are finally accepting lower offers as they realise inflated asking prices are not achievable."
Andrew Weir, of Foxtons, said: "Prices will only go down if we experience a drop in employment or rising interest rates or inflation."
Reader views (6)
The so-called 'property-ladder' has always been an emperor with no clothes. Even when the house you owned was certain to sell for more next month than this month, the nicer house which you wanted to own was certain to cost more too. What with stamp duty and moving expenses it everlastingly remained out of reach unless you could afford higher repayments and borrowed more. True, some people made money trading property but then, some people make money trading gold; still no-one calls the commodities market 'a ladder'. As for house prices going seriously down, that'll be the day: same day people stop wanting houses and move back to caves!
- Francis, London, UK, 27/02/2008 17:50
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We are being told by media that house prices are falling - the truth of the matter is that sellers have not reduced their asking price and we are in a 'frozen' status. Until realistically the vendors accept that gone are the 'golden housing days' and start to deflate the rather over inflated housing prices, first time buyers don't stand a chance getting on the property ladder. Hopefully the greedy estate agents that still over value a property than what it is worth may also recognise that in the long run it will harm their business too [many will have no choice but to close down many estate agent branches].
- Vasoula, London, 26/02/2008 20:17
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It is deep in the human race to want a home to call their own but state ownership is the answer in a crowded world. It reminds me when Mr. C. Wren wanted to build in London and could not for the nimbiy luddites scotched it all. In a time of rapid change and progress land nor property cannot belong to anyone, me thinks.
- Robin, UK, 26/02/2008 05:12
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But hey, Amiee, don't you understand that house prices are just going one way that is, up, forever and ever and ever.
Anyone who might be thinking a little bit differently, .i.e that prices might be going down after a long euphoric period of upward trends, are doom-mongers, pessimistic and dangerous, because they are talking the market down. Yeah, this is the rational time we are living in.
- Veronica, Londoon, 25/02/2008 23:23
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Peter Hahn is a business teacher! He should be telling no one to go near property until 2011. The toxic poison now destroying the US is at least as bad in the UK, what with all the self cert and 125% interest only mortgages out there. The FSA should be demanding to see anyone with a self-cert mortgage, to provide them their P60.
Also the prices quoted within this article; I take it they are the asking prices? There is no way with some of the auction sales recently that they are the sold prices.
PS please can we stop asking estate agents for their views on a potentially bankrupting purchase for the majority of the population. It's a bit like asking Jeremy Clarkson if cars are any good.
- Andrew, Clapham, UK, 25/02/2008 20:06
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So the article clearly states that "Over the last month prices have fallen 0.2 per cent on average", but Andrew Weir of Foxtons still doesn't think prices will go down. It's about time we put a stop to people with a vested interest in the property market making statements like that. It's comments like the above that have inflated the house price bubble to the ridiculous extent that it has been. Admit that prices are going to have to drop, stop talking up the market, and let's see a return to levels where first time buyers can afford a home and where property isn't just lining the profits of buy-to-let investors.
- Aimee, London UK, 25/02/2008 13:41
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