UK Property Market Role-Reversal Continues With Sharp London Price Drop
The role reversal in the UK property market is continuing apace according to the latest house price figures released by the Office for National Statistics. Over the past few decades the general trend has been for the property market in London and the South East to grow at a faster rate than the rest of the country during periods of upwards momentum for prices. And to drop at a slower rate than elsewhere during downturns.
However, over the past couple of years that has changed and average prices in London have been either sluggish or sliding. Prime and central London areas, which have seen the steepest prices rises in recent history, are now seeing a significant drop off. The most recent ONS data shows that over the year that ended May 31st London property prices fell by 4.4% - their sharpest decline since 2009.
That’s in stark contrast to UK-wide residential property price trends, which showed 1.2% growth. While down from 1.5% growth over the year that ended April, a not insignificant slowdown, that still represents a positive direction. And average price growth would have been significantly higher without the London market dragging on figures. North west England, which includes cities such as Manchester and Liverpool whose vibrant property markets and stronger rental returns have been attracting buy-to-let investors looking for investment properties, was the best performing region in the UK. Prices there were up an average 3.4% over the year.
Across the country the lack of clarity around the future of the economy following Brexit has been a drag on property prices since the referendum in 2016. Average price growth was a runaway 8.2% before the shock voter decision to take the UK out of the EU. The decision to extend the Brexit deadline from March to October gave the housing market a boost but analysts still believe that the political and economic uncertainty of the situation is having a major impact on both demand and supply levels.
For owners of investment properties in London or elsewhere in the UK concerned that the slump in London property prices could indicate a wider countrywide downturn, Pantheon Macroeconomics’ chief UK economist Samuel Tombs has some words of comfort:
“The downturn in London probably isn’t a sign of an impending slump elsewhere but reflects the slowdown in net migration, a glut of new-build flats and valuations correcting from excessively stretched levels.”
The recent strong performances reported by the UK’s publically listed house builders is also cause for optimism. Barratt Developments, the UK’s largest residential builder, recently reported record profits and the highest level of completed new homes since 2008.
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