The London housing market is starting to cool, say experts
05-10-2014
New figures from Halifax signal the start of a slowdown in London property prices
House sales
The furious hikes in London property prices have slowed in March and April as unaffordability bites Photo: PA
Anna White
By Anna White, Enterprise and property correspondent
The frenzied London housing market could be on the brink of a cool-down after UK house prices dipped for the second month in a row, according to Halifax.
Monthly analysis from the country’s largest mortgage lender showed the cost of an average home in Britain had dropped by 0.2pc last month, following a 1.2pc fall in March.
While values were up 2.5pc on the previous year, experts have warned that chronic unaffordability in central London, and a drop in mortgage approvals, could rein in the runaway house prices seen in the Capital since the recession.
“London usually outperforms for cycles of eight to 10 years,” said Lucian Cook, head of residential research at Savills. “Due to strong sentiment and price falls within that cycle, this may run on slightly, but we expect the London market to cool within the next 12 months.”
The average London house price reached £458,000 in March, up £63,000 on the previous year, while first time buyers need a cash pile of £70,000 to fund a deposit, moving costs and stamp duty.
"Affordability constraints are starting to bite,” Mr Cook continued. “And total five-year house price growth will be capped by earnings growth, given the likelihood of interest rate rises that will erode mortgage affordability."
Savills has forecast that house price growth in London will slow from 8.5pc this year to 6pc in 2015, 4pc in 2016 and will halve again to 2pc the following year.
Two of the most high profile residential and commercial developers have also called the top of the market in London with Grosvenor selling off £240m of its property portfolio in the Capital and Michael Marx, the chief executive of Development Securities, divesting away from prime central London. "There is a bubble and it will end in the way that bubbles end. It [London] is too hot,” he said.