London house prices were down £2,469 on average this month, according to Rightmove's latest House Price Index.
The average asking price for a home in the capital was £664,550, down 0.4 per cent from £667,019 in December.
Property market watchers said that there were signs that the market is recovering, but sellers had to price competitively to attract attention in a buyers' market.
It now takes 78 days on average to sell a house in London.
"Encouraging" start to 2024
However, Rightmove said more sellers were bringing 15 per cent more properties to market than this time last year, and London was the strongest market in the country when it comes to a 5 per cent rise in buyer enquiries.
“It’s premature to say whether the recent improvement in activity will translate into a strong market recovery during early 2024, but certainly the initial signs are encouraging." said north London estate agent Jeremy Leaf.
“In our offices, we’ve seen a similar picture to that painted by the Rightmove survey. No New Year fireworks, but more valuations, viewings, listings and offers than this time last year."
At a borough level, Wandsworth has seen some of the strongest annual growth, with house prices up 5.8 per cent since January 2023. House prices also rose by under three per cent in Westminster, Lambeth, Islington, Hammersmith and Fulham, Greenwich and Harrow.
Asking prices performed worst in Merton, with a four per cent drop in asking prices in just one month. Enfield and Camden have also seen annual drops of 5.3 per cent and 4.6 per cent respectively.
Across the UK as a whole, the average price tag on a home jumped by around £4,500 month-on-month in January, according to the property website.
Across Britain, the average price of a property coming on the market increased by 1.3 per cent or £4,571 month-on-month, to £359,748, Rightmove said.
Cost-of-living still squeezing buyer budgets
Despite the increase, average asking prices are still 0.7 per cent lower than a year earlier.
Competitive pricing from sellers is still vital, with the number of new properties coming to market outpacing an increase that is also being seen in buyer demand, the website said.
“Elevated mortgage rates and the wider cost-of-living squeeze are still limiting buyers’ spending power," said Tim Bannister, Rightmove’s director of property science.
“More new sellers are now entering the market, and with more confident pricing. While the increased level of buyer activity that we’re also seeing may justify some of this increased pricing confidence from sellers, it’s important that sellers who are keen to find a buyer don’t get carried away with New Year enthusiasm when setting their price expectations," he added.
“Accurate and realistic pricing for their local area is the recipe for success for sellers looking to get moving in 2024.”
Mortgage providers have entered into a competition to provide lower rates, entering the year determined to lend after a quiet 2023 due to interest rate hikes.
“The housing market is becoming more bullish by the week as banks continue to compete over mortgage rates," said Sam Mitchell, CEO of Purplebricks.
"The boost to demand and affordability is bringing buyers out in their droves, while those already on the property ladder are taking advantage of better remortgage rates and first-time buyers are finding it easier to access the market."
Tenants feel pressure as rents outpace inflation
The report was released as estate and lettings agent Hamptons said the average private rent on a newly-let property in Britain increased by 10.2 per cent annually in December, marking the strongest end-of-year annual growth since its records started in 2014.
The average monthly rent on a newly-let property in December 2023 was put at £1,340.
The 10.2 per cent annual increase in rental prices could have cost the average tenant who moved into a new home an average of £124 per month more in rent, equating to an extra £1,488 per year.
As mortgage rates continue their downward path, some of the upward pressure on rents should reduce, Hamptons predicted, as remortgaging costs for some landlords may be less steep than they were in 2023.
“Pressures on the rental market show few signs of abating," said Aneisha Beveridge, head of research at Hamptons.
“Rental growth has been more persistent than wider inflation, predominantly due to the scale of the costs faced by most landlords as a result of higher interest rates," she added.
“Slightly lower mortgage rates in 2024 should alleviate some of these pressures and take some of the heat out of the rental market, but tenants will probably continue facing bigger rent increases than they did pre-Covid.”
The Hamptons lettings index uses data from the Countrywide Group to track changes to the cost of renting and is based on achieved rather than advertised rents.
