House price growth slumps to its lowest level since 2012 as London property market tumbles by 3.8%
- Average property prices increased by 0.6% in year to February
- Property price growth now at lowest level seen since September 2012
- In London, average cost of a home fell by 3.8% in the last year
- House prices in south-east of England fell for the first time since 2011
- One analyst says London performance marks start of ‘correction’
The rate of annual house price growth in Britain has fallen to its lowest level for nearly seven years as the property market in London and the South East suffers a significant reversal, official figures revealed today.
The average UK house price rose by 0.6 per cent in the year to February, down from an annual increase of 1.7 per cent in the previous month, according to data from the Office for National Statistics and the Land Registry.
With the Brexit saga paralysing prospective home-buyers in the South East, the rate of annual property inflation has not been this low since September 2012.
Falling fast: Average house prices in the south-east of England fell for the first time since 2011 in the year to February.
The drop in house price inflation was down in large part to a downturn in the capital’s property market, where prices dropped a hefty 3.8 per cent in the year to February.
And property prices more widely in the south-east of England have fallen for the first time since 2011, dropping by 1.8 per cent in the same timespan.
The fall in London house prices was the biggest since mid-2009, but the city remains the most expensive place to buy property with an average price of £460,000.
Mike Hardie, head of inflation at the ONS, said: ‘Annual house price growth has slowed to the lowest rate in close to seven years.
‘Growth in Wales and the west of England was offset by a sustained fall in London and falling prices in the South East for the first time since 2011.’
Fluctuations: Annual house price rates of change in the UK since August 2006
By area: Regional house price fluctuations in the year to February, according to the ONS
Struggling: Property prices in London have been struggling over the last few years
Expensive: But, the average cost of a home in the capital is still well over £460,000
The average UK house price was £226,000 in February, which is £1,000 higher than at the same point a year ago.
The average house price in England increased by 0.4 per cent in the year to February, while in Scotland, prices fell by 0.2 per cent over the period, having risen by 2.4 per cent in the year to January. The average cost of a home in Scotland is now £146,000.
House price growth was strongest in Wales in the year to February, with the average cost of a home rising 4.1 per cent to £160,000. In Northern Ireland, property prices rose by an average of 5.5 per cent to £137,000.
While London house prices are falling over the year, the area remains the most expensive place to purchase a property, followed by the South East and the East of England, at £316,000 and £290,000 respectively.
The North East continues to have the lowest average house price at £125,000 and is the only English region yet to surpass its pre-economic downturn peak
Jonathan Hopper, managing director of Garrington Property Finders, described the scale of house price falls in London as ‘breathtaking’.
He said: ‘The South East of England has caught the capital’s cold, with prices in the commuter counties now falling on an annual basis for the first time in more than seven years.’
Mr Hopper continued: ‘On the market front line we are finally seeing the first signs of a much-delayed spring bounce, but as this data shows, the market is still highly volatile and after such a weak few months any future progress will be halting at best.’
Lucy Pendleton, founder director of independent estate agents James Pendleton, said: ‘The undeniable correction now at hand in London is the adjustment many have been waiting for.
‘Falling prices in the capital are a sign that vendors have finally got the message.
‘Sellers have needed a firm hand to guide them to more realistic prices recently and they are now embracing the power of realism to sell property in greater numbers. This is going to stoke demand and transaction volumes, which is what the market needs.’
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: ‘These figures show the property market has finally caught up with what we have been seeing on the ground for some time – in other words, a lot of caution and “wait and see” until political uncertainty lifts a little at least.
‘Nevertheless, transaction numbers have proved more resilient than expected, demonstrating that although business is tough realistic buyers and sellers are still seeking value, particularly in this traditionally busy spring buying season for the market.’
Bucking trends: Wales saw the strongest property price growth figures in the year to February
She added: ‘The country now finds itself in a pregnant pause while we now wait for the response of buyers and sellers to catch up with what we know has already started being written up in the annals of history — not a no-deal Brexit but no Brexit at all and one that seems permanently in doubt.’
Howard Archer, chief economic adviser at EY ITEM Club said the figures ‘very much fuel the overall impression that the housing market is being hampered as buyer caution amid already challenging conditions is being reinforced by recent heightened Brexit and economic uncertainties – although there are significant variations across regions with the overall picture being dragged down by the weakness in London and the South East.’
He added: ‘We suspect house prices will rise only 1% over the year and would not be at all surprised if they stagnate.
‘Consumers may well be particularly cautious about committing to buying a house, especially as house prices are relatively expensive relative to incomes.
‘Also it looks questionable whether the labour market and earnings growth will sustain their recent improvement.’
Today, the ONS also published its latest inflation figures. The figures revealed that inflation was stable at 1.9 per cent in March as a rise in fuel prices from February was offset by falls in food prices.
The figures ease pressure on the Bank of England to raise interest rates. The Bank of England targets inflation, which is the rate of price increases, at 2 per cent.