London was the worst-performing home market in the U.K last year for the first time in more than a decade and it may be stuck there.
Nationwide Building Society (NBS) said values in the capital fell 0.5%, the first full-year decline since the 2009 recession, lagging behind a 2.6% increase nationally. It’s the first time since 2004 that the city has ended the year as the slowest-growing region.
The weakness may persist in 2018, with property website operator Rightmove and the Royal Institution of Chartered Surveyors both predicting price declines in the city. Nationally, values will increase on average, though Nationwide sees only about 1% growth. That compares with a 4.5% rate recorded in 2016.
House prices in “prime” central London appear to be stabilising, while areas in the south and west of the capital such as Wadsworth and Richmond are now under increasing pressure, according to estate agent Savills.
The study is predicting that average property values in central London’s top-end enclaves such as Knightsbridge, Mayfair and other parts of West London will record no growth for the next two years following years of decline.
However, the company also concluded that certain parts of the market “may be bottoming out” and the prime markets of south and west London could bear the brunt of Brexit uncertainty regarding future interest rate rises. This market is defined as running from Battersea through Clapham and Wandsworth to the south, and Fulham, Barnes and Richmond to the west.
Typical prices in prime central London ended 2017 down 4% for the years as a whole, but prime south and west London experienced a bigger annual fall of 4.2%. Within this segment of the market, Fulham was named by Savills as the area that recorded the steepest falls.
Prices in Fulham fell by 4.6% in 2017 and were down more than 14% on their 2014 peak, said the company.
It means average values in Fulham, which passed the £1,000 per square foot mark in 2013, have fallen back to £890, well below Chelsea’s £1,600 average.
The property slowdown is due to factors including an inflation squeeze, Brexit uncertainty and tax changes affecting landlords and owners of second homes. Bank of England data on Thursday showed that approvals for mortgages were little changed in November and below the six-month average.