The average asking price of a London home is now £666,500
(Picture: Daniel Lynch)Average asking prices across London have dropped by 2.3 per cent – or almost £16,000 – in a month as buyers put moving plans on ice amid the cost of living crisis and escalating mortgage rates.
The average price of a London home fell to £666,500 over the past month, according to the latest house price index by Rightmove. Asking prices in the capital are up 4.6 per cent annually although, with inflation reaching 11.1 per cent in October, this still represents a fall in real terms.
Across the UK, house prices dropped to an average of £359,000 – a monthly fall of almost £8,000 which is the largest seen for four years.
The monthly dip is “an understandable short-term reaction to the economic turmoil and unexpectedly rapid mortgage rate rises and reduction in availability of mortgage products that we saw in late September and October, before things began to settle down,” said Tim Bannister at Rightmove.
House prices often drop in December as attentions turn to Christmas, buyers can be less motivated and sellers price competitively in a bid to secure offers, yet this month’s figures show larger falls than expected at this time of year according to Rightmove, indicating that movers are putting plans on ice amid hopes for a more stable outlook in 2023.
“House price declines since the mini-Budget are due to nervous rather than absent buyers,” said Tom Bill at Knight Frank.
“Recent mortgage market volatility has dented activity but there will be more clarity around the longer-term trajectory for house prices from March next year as rates settle down. The spring selling season will see the price expectations of sellers put to the test and, after 13 years of ultra-low rates, could be a ‘wake up and smell the coffee’ moment.”
Despite a 2.1 per cent monthly drop, asking prices across the UK are 5.6 per cent higher than this time last year – and just below the 6.3 per cent growth recorded at the end of 2021.
Enquiries to estate agents were up by four per cent over the past two weeks compared to 2019, and the number of views of homes for sale on Rightmove is up 11 per cent on last year, suggesting that there is buyer demand but movers may be waiting for more certainty in the mortgage and economic markets.
The Bank of England’s Monetary Policy Committee is expected to vote to raise the base rate of interest again this week, with an announcement due on Thursday 15 December. The MPC voted for an increase of 0.75 per cent in November which took base rates to 3 per cent. An increase of at least 0.5 per cent is expected this week.
“Our data suggests that there are many ready-to-go movers out there waiting for what they feel to be the right time to enter the market in 2023”, said Mr Bannister.
He added that there could be a bounce back in prices in February following a busy home-moving period in January.
Rightmove predicts an overall drop of two per cent in average UK asking prices next year as economic headwinds persist and the market normalises.
The data comes as trade body UK Finance said it expects the number of property transactions to fall by more than a fifth next year, returning the market to pre-pandemic levels.
It also estimates that mortgage lending to homeowners will drop in value by 23 per cent due to affordability pressures facing borrowers and higher interest rates.
However, the vast majority of borrowers will be able to maintain their mortgage payments, and arrears are likely to increase only marginally, UK Finance said.
James Tatch, principal of data and research at UK Finance said: “The high level of activity during the 2021 stamp duty holiday means that a large number of borrowers are due to refinance next year, pushing up the expected value of refinancing in 2023.
“The pressures being seen on household finances could mean that some customers have fewer options.
“However, there is wide availability of product transfers, and we would encourage customers to speak to a whole of market mortgage adviser to discuss the options best suited to their circumstances.”
