ONS House Price Index

Is London acting as a 'deadweight' on UK housing market?

With another dip in house prices in London, the capital is effectively acting as a "deadweight" for the UK housing market, according to one mortgage expert.

The comment follows the Office for National Statistics’ latest UK house price index, which found that average house prices increased by 3.1% in the year to July 2018, down slightly on the 3.2% growth reported in June.

It is the lowest UK annual rate since August 2013, when it was 3%.

ONS attributed the current growth figure to a slowdown in the South and East of England, especially in London, where prices decreased by 0.7% over the year, down from an increase of 0.3% in the year to June.

“Another dip in house prices in London is effectively acting as a deadweight for the UK’s housing market, heavily contributing to the lowest combined annual growth in five years,” said Suchit Sethi, founder of cashbackremortgages.co.uk. 

“Without solid performances from properties in cities like Manchester, Birmingham and Bristol, the UK’s housing market would be in a much graver state than present.”

The North West (5.6%), West Midlands and South West (both 4.4%) recorded the highest annual house price growth during the 12 months to July 2018.

“The property market in the South has always been in a different gear to the North, but Brexit concerns and excessive price rises in London and the South East in recent years have flipped everything on its head,” said Ross Boyd, founder of mortgage platform Dashly.com.

“In the capital, house prices are arguably still massively over-inflated and this is reflected in the negative annual growth figure.

“For many would-be buyers in London, houses have a red cross on the door.”

However, Peter Izard, business development manager at Investec Private Bank, said it remained cautiously optimistic about the prime central property market in London.

“London is still one of the key centres of the financial world with a high undersupply of property throughout London.

“The price adjustments  that have occurred over the last two years, uncertainty around Brexit, the general election tax changes  and the consequences these have brought have largely been priced into the market.  

“Therefore, these are supporting factors for the London property market and the prime areas to move forward on and we remain relatively optimistic that they will remain stable.”

Shaun Church, director at Private Finance, concluded: “Brexit uncertainty is the greatest test our housing market has faced since the 2008 financial crisis. 

“The fact that property prices are still growing – albeit at a more modest rate – is a testament to the resilience of the UK property market. 

“As gloomy predictions are made about the future of the housing market should we face a no-deal Brexit, UK homeowners should take solace in this persistent annual house price growth.”

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