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Biggest fall this year for house prices in London
Mira Bar-Hillel, Property Correspondent28 Jul 2008
London house prices plunged by 2.5 per cent last month to record their biggest fall so far this year, official figures revealed today.
Statistics from the Government's Land Registry show that prices in the capital are falling faster than anywhere else in the country.
The average London home sold last month cost £345,136 - nearly £10,000 less than in May.
The biggest drop was 2.7 per cent in Hammersmith and Fulham while in Bromley prices were 1.6 per cent down, and Richmond, they were 1.3 per cent lower. The best performer, Kensington and Chelsea, recorded only a 1.1 per cent increase.
House prices nationally fell by one per cent last month. The figures are particularly significant because, unlike other house surveys, they are based on actual sums received by vendors.
A separate report, commissioned by the National Housing Federation, today claimed prices in London would rise by 15 per cent by 2013.
Produced by Oxford Economics, it said prices would continue to fall this year and next but begin rising in 2010 as demand outstripped supply. However, experts have predicted a 20 to 25 per cent fall in London by 2010.
The 2.5 per cent drop reported by the Land Registry is five times greater than the next worst monthly figure in the capital this year. Despite this, the average price is still 2.4 per cent higher than in June last year.
Outside the capital, falls last month were steepest in the East at 1.9 per cent and the West Midlands and Wales at 1.7 per cent and 1.6 per cent respectively.
The West Midlands recorded a yearon-year drop of 2.3 per cent, while Wales and the South West had a 1.3 per cent fall.
Apart from Kensington and Chelsea, the only other London boroughs to see prices rise last month were Havering, up 0.3 per cent increase, and Southwark and Kingston both up by 0.1 per cent.
The Nationwide, which records the amount approved for lending to buyers, is expected to release figures on Wednesday recording a 7.5 per cent fall year-on year.
The latest data come as property intelligence group Hometrack said prices in England and Wales fell for the 10th month in a row, losing 1.2 per cent of their value.
The average property cost £168,500, the same as in October 2006.
Reader views (23)
Ladies and Gentlemen, welcome to the crash!
When house prices rise in London, it filters out to the rest of the country (so I`ve heard). Does this work when prices in London fall?
Reading the other comments on this article, it looks like more people are now starting to "get it", or have been written by my fellow members of the house price crash forum.
I have been taking a casual interest in asking prices in my area, and it seems that many vendors are still in denial. I believe that once the darker nights set in, a few more people lose their jobs and reality begins to sink in, we might see a touch of "panic".
A bit of advice for anyone who took out a large mortgage in the last couple of years - Only 23 years to go, and property prices always go up in the long term. You didn`t take out an interest-only mortgage, did you? Oh dear.
- Andrew, Birmingham, West Midlands, 29/07/2008 10:32
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Affordability of mortgages and deposit requirements are the factors governing prices, not media reporting.
Lending has returned to its normal parameters judged on a long term trend and vendors are going to have to realise that the reason they cant sell is because they are asking usually about 50% too much bearing this readjustment in mind. Falling prices are good news for many, why is it always reported as a bad thing. We don't celebrate every time the cost of everything else rises.
- Brian Watson, bristol uk, 29/07/2008 07:47
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This situation was inevitable. The banks have created this crisis. They have over lent for many years and have destroyed the link between wages and house prices. I think we are set for a long slow decline. Interest only mortgages were the last straw! Houses are homes not investments. The next six months will be dramatic for sure.
- Spencer Godden, Farnham, 29/07/2008 00:08
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To Ed from Croydon, a lot of it comes down to the economy. Lax credit conditions coupled with a robust economy drove the housing markets upwards and it will be tight lending and an economic slowdown that will blight the housing market. At the end of the day whilst households are contending with rising living costs and some are losing their jobs, paying the mortgage becomes more difficult which means that house prices have to fall to bring the market into equilibrium.
Yes, I give credence to the view that speculation and confidence played a role in the decade long 'housing boom' but this was underpinned by healthy economic conditions and frivolous lending by the banks. Even if the media colluded to only publish positive news, it is fundamentals that will play out in the long run. As Bill Clinton's election strategist said in 1992, 'it’s the economy, stupid'.
- Pav, London, UK, 28/07/2008 23:00
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@ Ed, Croydon
Sorry, but the media were happy to engage in needlessly property ramping and drawing people into the market when prices were on the way up. I'm now happy if they talk the market down to affordable levels.
- Ian M, Hull, 28/07/2008 22:49
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Who are these people? A shortage of housing is irrelevant if nobody can get a mortgage to pay for one. Demand is desire backed by the ability to pay - whilst there is a lot of pent-up desire to own a house, without the ability of people to pay for a house demand will continue to fall.
- Zady, London, 28/07/2008 22:33
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NHF have a vested interest! Even if house nominal prices rise in London by 15% over the next 5 years it will still be a significant real drop as "real" inflation is running at nearer 10%, as anyone living in the real world will attest (does anyone actually believe the ONS cooked figures?). 5 years of compounded inflation at this level means a 38% drop in the purchasing power of the pound. The property market is toast as incomes will not rise to counteract this! Expect to see a crash worse than the last one as the speculative greed goes from denial to fear in the coming months.
- Mark Smith, London, 28/07/2008 22:22
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This is great news. As a recent first time buyer, I crave positive headlines to help me feel reassured.
Quite frankly, how forecast accuracy is extremely difficult to predict on either side of the housing market. I do believe there is a certain agenda behind all the dire headlines, and that most journalists quite simply can't afford to buy themselves and so are happy to ruin market sentiment.
- Bea Needham, London, 28/07/2008 22:20
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Price falls are hardly a fault of the media even though they might speed it up a bit. The fact is we were in a giant housing bubble with houses ridiculously over priced.
There was never a shortage of properties, it was a myth. All you had to do was look at a property local paper to see hundreds of properties for sale.
The days about lying about incomes and fraudulent gifted deposits are over. Banks are in great pain due to all the repossessions, there extra money to lend 7-9 times income is gone. Banks don't want high risk borrowers anymore like some buy to let investors.
The days of sensible lending are here again with 3-4 times salary and large deposits.
Why blame the media for this when prices are simply correcting themselves. What people should do instead is say to themselves "Was I greedy?" or "Did I use common sense with that purchase?" before they blame others for falling prices.
Remember rice falls are good for first time buyers and for people wanting to climb up the ladder with smaller steps.
We are going to have a massive correction in during the next few years.
As for the buy to let investors loosing out they should ask themselves why were they so irresponsible releasing all their equity in their properties to purchase more in a housing bubble.
Prices are likely to fall 50% before they stall and start to slowly rise.
- Gavin, London, 28/07/2008 22:19
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I have to laugh so many people think its " all the media's fault" that house prices are falling. Nothing to do with the following of course:
1. Most people are spending more than they earn already without going and getting an even bigger loan
2. House prices are at a historical high compared to earnings
3. The banks have run out of money to lend as they already lent it to poor credit risks in the USA (and elsewhere..) and now the borrowers have defaulted en masse
4. There's a recession of unknown severity on the way
5. Interest rates may have to go up on account of rising inflation
None of the above have anything to do with the media.
- M Johnson, London UK, 28/07/2008 21:37
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Why not log in to House Price Crash? The analysis is truly excellent and unbiased, often from the best in the industry / City under pseudonyms. No untruths like some papers.
- Austin Tassletine, South West, UK, 28/07/2008 21:24
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For those who think that the market is going anywhere other than down the toilet - self-delusion writ large! There is no housing shortage and there won't be anytime soon - if ever. 10x average income for the average property was never sustainable, recent years have just been a pyramid scheme. Watch prices fall by 60% and why worry - unless you're a property investor this means no more than your kids will actually be able to move out of your place and make lives for themselves. Rejoice at the news!
- Clive, Fulham, 28/07/2008 21:01
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We need a return to 2001 prices before I will even glance at a house. And I ve been waiting for the crash for nearly a decade. For those who disagree, your arguments are weak, and do not hold water.
- Daniel, Leeds, 28/07/2008 21:00
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What housing shortage? Where are all of those tens of thousands of people who are forced to live in fields with nothing but a tent to call home in the UK? Well?
Let's face it...the "housing shortage" is a lie.
The house price correction has only just begun. What worries me more is the vast "under-reported" price inflation of necessities such as food and energy. People will not be able to afford a "move up the ladder" while they are struggling to keep the electricity switched on in their current home.
- Chris Parker, Liverpool, UK, 28/07/2008 14:16
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The media have a huge role in determining the future of the housing market. Like most financial markets, it's based on confidence - the more confidence people have that property is a sound investment, the more inclined to buy they will be. The media contributed hugely in undermining confidence in the housing market by constantly frontpaging about how dire the situation was. Frankly, as a home-owner, I'm happy to see a bit of positive news on the matter as it might draw people back to the market. If it is a tactical release by the NHF to counter the Land Registry Data, then I'm all for it!
- Ed, Croydon, London,, 28/07/2008 13:56
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So what happened to the proposed 1% rise in house prices which was talked about in 1973?
- Paul, poole, 28/07/2008 13:19
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I think this forecast may well be right, London property prices have always recovered historically from previous falls and prime London locations will always be sound investments in the long term.
- Barry Coulson, london, 28/07/2008 12:18
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The fundamental problem that there simply isn't enough housing in the UK to meet still-growing demand as the population rises still hasn't been addressed. Even the government's vaunted 15 eco-towns and Thames Gateway development (assuming very much of it actually gets built, which is unlikely in this land of NIMBYs of ours) won't come close to satisfying the demand.
So yes I do believe it!
- Roy Stilling, Gillingham, Kent, 28/07/2008 11:48
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15% over five years. Compound growth of 2%pa. Me thinks this is a tactical release by the NHF set to counter the Land Registry data which they knew was coming! I would be very interested to see the methodology of their study since Deloitte said a drop of 30% by end of 2010. So who are we to believe, if we care at all!
- Michael, London, UK, 28/07/2008 11:43
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You're right, we don't believe it.
- Bruce Robertson, Brighton, 28/07/2008 11:26
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Which side has the bigger marketing and PR budget - those who want prices to fall or those who want prices to increase...
- Charles Hopton, London, 28/07/2008 11:20
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I don't believe it! There are still people who are in utter denial about the housing market. We are in a totally different situation now than we were only 6 months ago when it comes to buying houses, I think that it will take many years for the housing market to bounce back. Prices still have a long way to fall and the banks cannot lend.
- Mark Burton, Hastings, 28/07/2008 11:17
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Who cares what's going to happen to houses in 5 years time, most people just want to survive this year. Anyway who are these researchers and expert analysts, are they estate agents in disguise?
- Mr S.Port, London, 28/07/2008 10:24
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