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House prices: slump starts
Jonathan Prynn, Consumer Affairs Editor01.04.08
London house prices have suffered a heavy fall, leading to fears that the market has passed the turning point.
The capital as a whole saw a 0.4 per cent drop in February, leaving the average at £353,760. It is the biggest monthly downturn since March 2005 when values slumped by 1.2 per cent.
Almost a third of boroughs - from Barnet to Merton - saw property prices dip, according to Land Registry figures.
Significantly, the biggest losers were in Kensington & Chelsea, the area that has benefited most from the City bonusfuelled property explosion of the past decade. Values there fell by 0.7 per cent in the month.
The impact of a less generous bonus round has also been seen in a big drop in the number of London properties changing hands for more than £1 million. It fell by 34 per cent, from 327 to 215.
The Land Registry figures are regarded as the most reliable of any house price measures because they record all prices at completion rather than asking prices or those recorded by a particular lender. The February slump will increase fears that London is heading for a painful house price " correction" after trebling in a decade.
Yesterday forecasters Capital Economics said it was "entirely plausible" that prices could tumble 25 per cent in two years. The Land Registry statistics show that the losses are concentrated in the wealthier boroughs of west and south-west London.
The other boroughs where prices fell in February - despite an interest rate cut at the start of the month - were Barnet (0.3 per cent), Ealing (0.3 per cent), Hillingdon (0.3 per cent), Islington (0.4 per cent), Kingston upon Thames (0.4 per cent), Merton (0.5 per cent), Richmond upon Thames (0.3 per cent) and Wandsworth (0.2 per cent).
Although annual house price inflation in London is still running at
10.6 per cent, experts believe the turning point has now been passed.
Home owners were given a glimmer of hope today when a leading City economist predicted that interest rates will be slashed to just 3.5 per cent next year.
For a London family with a typical £200,000 mortgage it would mean a saving of around £110 a month.
Reader views (13)
Fat cat bonuses gone (top end houses), first time buyers gone(bottom end). The housing pyramid is now a prism! There's no such thing as a housing prism! I'm worried.
- Phelim, London, UK
What is the problem with lower house prices? If you have one house (i.e. a home rather than an investment) it's value from month to month, even year to year, really doesn't matter. It's only an issue when you come to sell it.
- Paul, London
What a ludicrously over hyped article. Statistically, you simply cannot draw conclusions from such minute percentages. Highly irresponsible!
- Dr Pangloss, Hampstead
I think the previous writers have failed to grasp the fact that the UK property market, and in particular the London market, has been fuelled by the largest credit boom in history and that prices have been pushed to valuations that are totally unsustainable as the banks come to their senses and rein back on irresponsible lending practices. We've had the party and it's time for a really mean hangover.
- The Bear, London, Uk
If it stays like this for a year the drop would be 0.4% x 12= 5% without accumulative consideration.
As a first time buyer planning to buy 200000 property you save £10,000 over the year. Rent and save for deposit - future is bright for patient first time buyers.
- Yuriy,, Northolt , Middlesex
Slightly sensationalist perhaps?! 0.4%... If interest rates drop as low as 3.5% then we may well see a lot of tempting fixed rate mortgages again... When push comes to shove there's still not enough housing in London to satisfy demand from the burgeoning population - be it for rent or for purchase.
- Headhunter, London
With mortgage lenders upping rates, withdrawing deals and increasing deposit requirements, it is inconceivable that an industry which relies on borrowed money will not face a severe downturn. I mean, where is the money to plug the gap supposed to come from?
- Paul, Dubai, UAE
Its sensationalist reporting like this article that could possibly fuel a recession and fears in people. 0.4% is hardly a slump!
Come on Evening Standard stop trying to create a feeling of doom and gloom everywhere!
- Shona, London, UK
"For a London family with a typical £200,000 mortgage it would mean a saving of around £110 a month" because it is, your looking at more expensive mortgages if you can get one, banks are pulling out of the mortgage industry as fast as they can to save themselves.
- Gilli, London
North London prices won't fall. The area is special, especially my house.
- Donny Darcu, London, N10
You lot have no idea what's around the corner waiting for you. you'll work for the rest of your lives, just to pay off a mortgage that's worth more than the value of your home.
- Gilli, london
I agree with S Luker - this is hardly evidence of a slump. Come on, for first time buyers wanting to get on the property ladder, it is still proving elusive.
Roll on a proper correction in housing prices - these minuscule drops are not worthy of mention or reporting in the context of a perceived slump.
- Ricko Vargez, London
0.4%? Hardly a slump quite yet, considering the double figure growth for the last three years.
Considering that to buy a humble one bedroom flat can now cost a distinctly unaffordable £1,200 a month in repayments, a real slump might be welcome by more than a few people.
One person's loss is another's gain in this free-market economy.
- S Luker, London, N1
