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Capital's house prices fall £3,000 in a month
Mira Bar-Hillel, Property Correspondent29 Sep 2008
The selling price of a London home has plummeted again - but it has not made buying one any more affordable, experts warn today.
Figures from market monitor Hometrack show average prices fell £3,000 between August and September, to £293,600.
Sale prices in the capital have now fallen 7.3 per cent, or about £23,000, since September last year - when the average was £316,000.
But first-time buyers are unlikely to benefit, said Richard Donnell, Hometrack director of research: "The fall in prices should be boosting housing affordability but this is not the case.
"Higher mortgage rates mean the real weekly cost of buying an average two-bed property today is 12 per cent higher than it was a year ago, although the price may be lower.
"In addition a far larger deposit is needed, which many buyers cannot find. Most would-be first-time buyers are turning to the rental market, which is still at least 30 per cent more affordable than buying."
The only double-figure fall so far has been in Merton, where the average-price is down 13.2 per cent over the past year. Other big annual falls are in Hackney (9.7 per cent), and Sutton and Tower Hamlets (both 8.9 per cent). The smallest annual falls were in Westminster (4.6 per cent) and Brent (five per cent).
The biggest monthly declines in September were in Ealing, Barnet and Sutton, all down 1.7 per cent.
The Hometrack report follows last Friday's Land Registry figures, which showed sharp falls as well. Seema Shah of analysts Capital Economics said: "House prices in August recorded their sharpest decline in the history of the Land Registry index.
"With transactions less than half of their level a year ago, coupled with the fact that the outlook for the economy is steadily deteriorating, the speed of this housing market correction still has the potential to step up a gear."
She pointed out that the Land Registry index measures completion prices, so it lags behind figures based on prices at exchange of contracts. "We believe buyer confidence is almost certain to be depressed further as the economy slows sharply and unemployment continues to rise," she said. "It is hard to be optimistic."
The number of property sales remains at an all-time low, with further falls during August.
The average time a home is on the market until an offer is accepted is edging closer to three months. The average reduction from asking price to sale price has grown to 10 per cent.
Mr Donnell said: "The London market is posting larger price falls than the rest of the country. This is to be expected, as in the two years before the credit crunch average values in the capital grew at twice the national rate, meaning they had further to fall back.
"Add to this the importance of financial services to the London economy, and it should be no surprise the turmoil in financial markets is taking a heavy toll on the demand for and price of housing.
"It looks like 2008 will remembered as the year when the housing market ground to a near-standstill."
Reader views (4)
Kmawer, A house should be a home to live in, and of course you would spend money on it, everyone has to. Homeowners have had it good for far too long, making huge amounts of money on properties, especially buy-to-let properties. It's about time house prices took a tumble to realistic prices, as let's be honest the majority of houses are not worth the prices that are paid for them. Greed has taken over. I hope they fall dramatically, and then those who have taken out mortgages far exceeding the amount they can reasonably pay back may think long and hard next time before taking on a commitment they cannot actually afford to pay back!
- Sue, Orpington, Kent, 30/09/2008 09:55
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I agree with George, these decreases won't have much effect. The most I could hope for is if they were to fall to 2005 levels at the very least.
- Dave, London, 29/09/2008 17:12
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A house is a investment ,, owners spend money on there property.. so people . who say there trying to get on the housing ladder...its always been like that!!
- Kmawer, HERTS,, 29/09/2008 16:33
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As someone trying to get on the property ladder even a 7.3 per cent fall in the last year does not help. This is because prices have risen way in excess of this figure over the last 5 years and my wages have not risen at such a rate. The market in London (in my opinion) has been rising recklessly unchecked and it amazes me that these relatively small falls are being reported with such concern. Prices need to fall to acceptable ratios of normal salaries and only then will the market begin to pick up. The banks and Estate Agents need to be heavily regulated to allow this to happen; otherwise I fear that greed from both parties will once again take hold and the housing market suffer in the longer term.
- George, Bromley, 29/09/2008 12:36
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