Latest figures from Britain’s biggest mortgage lender Halifax showed the average cost of a home in the capital dropped 4.1% to £529,814 in the 12 months to August.
Nationally prices fell 4.6% over the year to an average of £279,569, the steepest annual fall since 2009. The monthly fall 1.9% was the largest since November 2022.
Kim Kinnaird, director, Halifax Mortgages, said:“It’s fair to say that house prices have proven more resilient than expected so far this year, despite higher interest rates weighing on buyer demand.
“However, there is always a lag-effect where rate increases are concerned, and we may now be seeing a greater impact from higher mortgage costs flowing through to house prices.
“Increased volatility month-to-month is also to be expected when activity levels are lower, though overall the pace of decline remains in line with our outlook for the year as a whole.
“We do expect further downward pressure on property prices through to the end of this year and into next, in line with previous forecasts.
“While any drop won’t be welcomed by current homeowners, it’s important to remember that prices remain some £40,000 or 17 per cent above pre-pandemic levels. It may also come as some relief to those looking to get onto the property ladder.”
Matt Thompson, head of sales at London agents Chestertons, said: “With higher interest rates impacting on UK households, property buyers are adopting a more strategic and flexible property search by adjusting their budget or widening their search criteria to find a suitable home. Although some buyers took a break during the August holidays, others utilised last month to enter price negotiations or seal the deal by signing contracts.”
Kundan Bhaduri, director of London-based property developer and portfolio landlord, The Kushman Group, said: “The market has experienced tremendous growth in recent years, with record-high average property prices in August 2022. Such rapid house price appreciation was unsustainable in the long run. The softening in prices in 2023 should be seen, in part, as a return to more reasonable and sustainable levels.”
The Bank of England has pushed up rates 14 times since December 2021 to the current level of 5.25%. However Governor Andrew Bailey said in a speech yesterday that the cost of borrowing is now close to its peak.