The fall in the London property market is gathering pace with house prices dropping at their fastest rate since the peak of the 2009 global financial crisis last month, latest figures showed on Friday.
Britain’s biggest mortgage lender Halifax said values were down by 2.6 per cent in June, leaving the average price in the capital at £533,057, a loss of around £15,000 over 12 months.
It was the fastest rate of decline of any UK region apart from the south east where prices were 3 per cent down.
However, the long feared full scale crash in London property prices has not yet materialised despite 13 consecutive increases in interest rates from the Bank of England and the cost of average fixed mortgage deals passing the six per cent mark.
Kim Kinnaird, director, Halifax Mortgages, said: “How deep or persistent the downturn in house prices will be remains hard to predict. Consumer price inflation is likely to come down in the near term as energy and food prices look set to reverse their steep rises, but core inflation is clearly proving stickier than originally expected.
“With markets now forecasting a peak in Bank Rate of over six per cent, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year.”
Market commentators said the impact of higher borrowing costs on house prices has been a “slow burn” because the vast majority of owners with mortgages are on fixed rates that are not immediately hit by any moves by the Bank of England.
Tomer Aboody, director of City based property lender MT Finance, said: “Although we have seen a fall in the demand and pricing, this is far from the expected or predicted downward trend. The sentiment is that the market is keeping a stiff upper lip, with buyers and sellers still out there, making the impact less volatile.
“Of course, the continued interest rate rises are impacting buyers, as people wait to see where the new norm settles, but we are not seeing the ‘crash’ that many were expecting because proportionately very few people are being affected by the rate hikes, since most are currently on fixed mortgages.
