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House price growth in the capital slows as demand weakens

Slowing demand and oversupply in London’s housing market in the quarter following the EU referendum has resulted in the slowest price growth in the capital for 20 months.

The figures, revealed as part of Hometrack’s UK Cities House Price Index, show that London house prices rose just 0.9% in Q3 as fears of a housing bubble combined with a tightening credit environment and fears over a potential mansion tax drove down prices.

The property market analysts said that the flow of new properties onto the London market was outmatching demand, with the ratio of sales to new supply at its highest level in three years with the potential for a prolonged slowdown price growth possible.

Commenting on the figures, Russel Quirk, founder and Chief Executive at online estate agents said that, while the jury is still out on whether Brexit is having an impact on the property market, it is clear that the country is in something of a ‘European limbo’.

He added that, while the drop is something of a shock, it was all part of the supply and demand dynamic which dictates the UK property market.

Quirk commented: “It’s clear that the European limbo that the country as a whole is currently stuck in until Article 50 is triggered, has led to an air of panic with the ratio of sales hitting a three-year high.

“This imbalance of supply outstripping demand is somewhat of an anomaly for those selling in London and so the resulting fall in prices has probably come as more of a shock than it actually is.

“This supply-demand seesaw is the basic premise on which the UK market and the value of property is decided on. It just so happens that London is currently sitting at the bottom end of this seesaw, along with eight other major UK cities.”

While the significant slowdown in the last quarter is the headline figure to come from the data, the numbers show that over the year price growth remains robust with a 10% growth in year-on-year values.

Similarly, the figures paint a rosier picture for the UK market as a whole, with an average price growth of 8.5% across the country.

Quirk added: “It is important to note that more than half of the cities monitored in the Hometrack index are recording higher annual growth rates than they were in January, so whilst London is cooling the UK market as a whole doesn’t seem to be feeling the chill.”