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London house prices fall for first time in 8 years – but northern cities soar

By Vin Parmar on in Industry News

London house prices fall for first time in 8 years – but northern cities soar

House prices in London are at their first annual decline in eight years, which makes the capital the worst performing region in Britain since 2005.

Data published by Nationwide Building Society showed a ‘marked slowdown’ in London, while the rest of the country’s prices continued to rise. While price growth in London has been falling for a while now, these are the first figures from Nationwide to show an actual fall since the onset of the financial crisis.

London’s average house prices have fallen to 0.6 per cent in the year to September, compared to the national average growth of 2 per cent. Analyst at Capital Economics said: “For now, with no signs of a downturn in London’s labour market, we suspect it reflects sellers finally taking a more realistic view of what their homes are worth. If so, it’s unlikely to be the start of a sustained correction.”

Annual % change in house prices 2017

Nationwide said a north-south divide is emerging, with growth in the West and East Midlands, Yorkshire and the North exceeding growth in southern cities.

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Annual per cent change in house prices in 2017. Source: Nationwide

This was confirmed by data from house price analysts Hometrack. It shows that in Manchester, Birmingham and Edinburgh, house price growth soared ahead while London drags down the overall growth.

Manchester’s annual price growth was 7.3 per cent. Birmingham’s rate of growth was 6.7 per cent and Edinburgh’s growth was 6.6 per cent. Falling unemployment and record low mortgage rates continue to support demand.

House price growth across the 20 biggest UK cities

According to Hometrack, the capital’s price growth rate is 1.9 per cent.

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House price growth across the 20 biggest UK cities. Source: Hometrack

Richard Donnell, Head of Research at Hometrack, said “this was a pattern (which is expected) to remain a feature of the market for the rest of the year and into 2018”.

He added, “the upward momentum in house price growth across regional cities shows no sign of slowing”.

Across the UK’s 20 biggest cities, the average annual house price growth slowed to 4.9 per cent in August, compared to 6.6 per cent in the last year. Compared to three months before, the price growth rallied slightly, with prices up 2.5 per cent between June and August.

The Bank of England revealed that mortgage approvals fell in August, down 3.3 per cent from July’s total. This is almost 40 per cent lower than the typical number of approvals before the credit crunch. Analysts at Capital Economics added that this “sustained weakness in mortgage demand has taken its toll on house price inflation this year”.

Hometrack also calculated that the total value of properties in the UK’s biggest 20 cities has now exceeded £3 trillion, which shows 43 per cent of total value of the UK’s housing market.

In these cities, there is £610 billion of outstanding mortgage debt secured against the value of housing, equal to 20 per cent of the total value.