London has been described as a ‘deadweight’ dragging down the rest of the property market because of its tumbling house prices.
This is the view of the founder of cashbackremortages.co.uk, Suchit Sethi, who was commenting following the release of the latest set of house price figures from the Office for National Statistics (ONS).
It showed the UK housing market had seen price growth of 3.1% in the year to July 2018, which is down slightly on the 3.2% increase in June.
According to the ONS, it’s the lowest annual rate rise since August 2013 but is following the trend of slowing growth which the market has been experiencing since mid-2016.
Manchester, Birmingham and Bristol
However, it’s the south and east of England which is driving this sluggishness with London being the main culprit. The capital experienced the lowest annual growth, seeing house prices fall by 0.7% over the year. In June they went up by 0.3%.
All other areas of the country saw healthy rises, with the North West seeing annual growth of 5.6%. The West Midlands and South West experienced price increases of 4.4%.
Sethi said these regions were acting as a bolster to the market. He explained: “Another dip in house prices in London is effectively acting as a deadweight for the UK’s housing market, heavily contributing to the lowest combined annual growth in five years.
“Without solid performances from properties in cities like Manchester, Birmingham and Bristol the UK’s housing market would be in a much graver state than present.”
North/south divide
Indeed Sam Mitchell, CEO of online estate agents Housesimple.com, said the figures provided further confirmation that the north/south divide had been turned on its head.
He said: “While property prices in the north have a spring in their step, driven by inward investment, thriving regional business hubs and a buoyant jobs market, London price growth is in reverse.
“London is firmly a buyers’ market at the moment with heavy price discounting the norm. There is a new reality in the capital that sellers are having to come to terms with.”
Despite the decline, London property still remains by far the most expensive region in the country with the average price standing at £485,000 according to the ONS. This compares to the UK average of £231,000. In the North East prices average at £132,000 – the lowest in the UK.
Commuter town boom
Recent research by Post Office Money revealed first-time buyers were looking at commuter belt towns to set up home in a bid to avoid the capital’s high but falling prices.
Chrysanthy Pispinis, from Post Office Money explained: “While London itself may have seen house price decreases, towns within a commutable distance such as Reading and Luton have seen nearly 10% growth over the last year alone due to sustained interest.
“With first-time buyers increasingly citing location as an area they are willing to compromise on (19%) it follows that buyers have been looking for more affordable yet commutable options.”
