London house prices rise less than UK average for first time since 2008

House prices in London grew at a slower rate than the national average in 2016 for the first time in eight years, according to the mortgage lender Nationwide.

Average prices in the capital increased by 3.7% over the year, compared with an average rise across the country as a whole of 4.5%. It is the first time the UK has outperformed London since 2008, when the nation was in the grips of the global financial crisis. UK prices rose 0.8% in December.

“There are signs that London’s significant period of outperformance may be drawing to a close. For the first year since 2008, annual house price growth in the capital was lower than the UK average,” said Robert Gardner, Nationwide’s chief economist.

London remained the most expensive place to buy a home in 2016, with an average price in the fourth quarter of £473,073. The average price nationally was £205,937 over the same period.

Gardner said 2016 had been a stable year for the housing market with annual price growth the same as in 2015, but that the rate was likely to slow in 2017.

“Looking ahead to 2017, house price prospects will depend crucially on developments in the wider economy, around which there is a greater degree of uncertainty than usual,” he said.

“Like most forecasters, including the Bank of England, we expect the UK economy to slow modestly next year, which is likely to result in less robust labour market conditions and modestly slower house price growth.”

Nationwide said a small rise in UK house prices of about 2% next year was more likely than a drop, because of a shortage of homes on the market and low interest rates that would help to drive demand for mortgages.

House prices grew across all regions of the UK in 2016. The sharpest rise was in East Anglia, where prices rose 10.1%, and the weakest was in the north, where prices were up just 0.1%.

Economists including those at the Bank of England have said 2017 is likely to be a tougher year for consumers and business against a backdrop of slower growth, higher inflation and weak wage growth.

Jeremy Leaf, a north London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors, said: “London clearly has suffered more in the price stakes than elsewhere in the country, a reverse of what we were seeing earlier in the year and for most of 2015.

“The real test for the market will come in the early new year when we see whether continuing low mortgage rates and lack of new and existing housing supply prove more relevant than uncertainty over unemployment, inflation and the wider economy post-Brexit.”

Housing experts say demand for properties at the top end of the market in London has been affected by the introduction in April of a higher rate of duty on second homes, as well as uncertainty surrounding the Brexit vote.

Last month Barratt Developments said it was cutting prices on some of its most expensive London homes because of waning demand. The housebuilder said that although overall market conditions were healthy, it was proving more difficult to sell homes priced above £1m in the capital because of too much supply.

Edward Rook from the estate agency Knight Frank said the number of Londoners buying property in the home counties had risen 36% in 2016, as buyers sought to get more for their money outside the capital.

He said: “As prime markets in the capital pause for breath, buyers have been tempted by the extra space and relative value on offer, especially in town markets. An easy commute back to the city and proximity to good schools are often the key considerations for such buyers.”

According to Nationwide, affordability has improved in Scotland, the north, east Midlands and Northern Ireland over the past 10 years. In London and the south of England, however, more people have found themselves priced out of the market or having to borrow a greater multiple of their income.

Among first-time buyers, median loan-to-income ratios are highest in London and the south-east, at around four times income; and lowest in Northern Ireland, at less than three.

 [Source:- theguardian]