The average house price in London has slipped below £500,000 for the first time in almost three years! This represents a major shift in the capital’s housing market. This information is based on official data released in May 2024.
While house prices across the UK rose year-on-year in March, London bucked the trend and property prices continued to fall. This is in stark contrast to other parts of the country, where the market is rebuilding. London and the South-East were the only areas where prices fell.
Buying a house in London just got cheaper! According to London Registry data, the average house price in London in March 2024 was £499,663. This is £17,500 less than in March 2023, and represents a fall of 8% over 18 months.
After record-high house prices in August 2022, economic instability caused by the “mini-budget” presented by Liz Truss and Quasi Kwarteng is the main turning point, according to analysts. This has had a major impact on the mortgage market and consequently house and land prices.
In addition, high inflation has actually caused house prices in London to fall by up to 16%. This means that the purchasing power of a £500,000 home is now significantly reduced.
The Impact on Different Property Types
The impact of recession is not equal on all asset classes. London’s most expensive homes, particularly detached homes, have been hit hardest. The average price of a detached house in the capital fell to £1 million (£1.004 million), representing a drop of 7%.
Inner London boroughs suffered the worst, with prices falling by 7.3% year-on-year. In some central areas such as Westminster, Camden and the City of London, prices have fallen by more than 20% compared to March 2023.
In contrast, outer London appears to be more resilient. The average price of a flat in outer London has seen the least fall, just 1%.
Rental Market Trends
While the sales market is showing improvement, London’s rental market remains a different story. Rents in the capital continue to rise, albeit at a slower pace than previous record highs. The average rented house has now reached £2,070 per month, representing an increase of more than 10% year-on-year. The most expensive city to rent is still Kensington and Chelsea.
Industry Concerns
Experts such as Craig Fish, director of Lodestone Mortgage and Protection, have highlighted the challenges in the market. Often, the sale price of the property is lower than the expected price, which creates a big difference between the expectations of the seller and the buyer. Additionally, uncertainty in future mortgage rates has made many buyers reluctant to buy at all. As a result, there is a large number of inquiries in the market, but the number of actual sales is low.
According to Mr Fish, new investment is slowing down and older property owners are not exiting the market, so the buy-to-let market is still stable.