House prices in London have fallen for the first time in eight years, new figures have revealed.
According to Nationwide, property prices in the capital have fallen 0.6% in the past year to £471,761.
London was the only region to see a year-on-year price decline, with price growth in the North now exceeding that in the South.
UK house prices rose 2% annually in September, down from 2.1% in August.
On a monthly basis, house prices rose from -0.1% in August to 0.2%, taking the average price to £210,116.
Robert Gardner, Nationwide’s chief economist, said that despite the slowdown low mortgage rates and “healthy” rates of employment would continue to support demand.
He said: “Housing market activity, as measured by the number of housing transactions and mortgage approvals, has strengthened a little in recent months, though remains relatively subdued by historic standards.
“House price growth rates across the UK have converged in recent quarters. Annual growth rates in the south of England have moderated towards those prevailing in the rest of the country.
“London has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years, albeit by a modest 0.6%. Consequently, London was the weakest performing region for the first time since 2005.”
Combined with slowing wage growth, households are beginning to feel the pinch as their disposable incomes start to fall. This has led to affordability pressures, with many buyers adopting a more cautious approach and putting off purchases.
Stamp duty changes and buy-to-let tax hikes, which make it more expensive to buy a property, have also been blamed for the downturn in the London property market.
Despite the reversal in fortune for the North-South divide, the gap is unlikely to converge dues to the sky-high price growth seen in the south in recent years.
Nationwide said: “While price growth in the South has slowed, the gap in cash terms between Southern and Northern England is still exceptionally high at £171,000, a figure which has doubled over the past decade.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “These figures underline what we shouldn’t do – in other words, judge what is happening in the property market by one piece of data.
“It shows the North-South divide in reverse and confirms what we have been seeing on the ground – that the London market is struggling for mainly affordability reasons and it is only those sellers who recognise the changed market conditions that are doing deals.
“Buyers and sellers are still nervous about prospects for the market in view of lack of perceived progress in Brexit negotiations and concerns about imminent rises in interest rates.”
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