London's housing market is in freefall, with average house prices plummeting by 3.7% over the year to £545,000, new figures from the Office for National Statistics (ONS) reveal. While the rest of the UK sees a general rise in property values, London's affluent neighbourhoods are taking a particularly hard hit.
Westminster's house prices have dropped by 22.8%, while Kensington and Chelsea saw a decline of 10.7%. Hammersmith and Camden also suffered drops of 7% and 6% respectively, highlighting the cooling trend in London's higher-value segments.
The struggling market can be attributed to several factors, including the impact of stamp duty on high-value transactions. Four out of five first-time buyers in London still incur this cost, despite government relief for those buying homes up to £300,000. Zoopla property portal estimates that just one in ten first-time buyers in the North of England pay stamp duty.
The recent rise in mortgage rates has also hit London buyers hard due to their typically larger borrowing requirements. Jonathan Hopper, chief executive of Garrington property advisors, notes that higher interest rates have significantly reduced the amount London and South East buyers can afford to borrow, exacerbating the financial squeeze on consumers.
Propertymark's Nathan Emerson warns that ongoing political uncertainty will continue to impact buyer sentiment in the coming months. Zoopla points to external factors such as the summer heatwave and World Cup distracting prospective buyers, with buyer enquiries down by a fifth and agreed sales experiencing a 7% reduction. However, experts anticipate market activity to rebound in autumn once there is greater clarity following the government's Budget.