London house prices fell sharply in October but remain close to all-time highs, latest official figures reveal today.
The average cost of a home in the capital dropped by 3.6%, an unusually large monthly fall, according to the Land Registry, slashing more than £16,000 from the value of a typical London home.
That left it standing at £515,504, down 3.1% year on year. However, even after the big fall the average price is still only 5% below the high of £543,572 reached in August 2022.
Land Registry figures tend to lag the market as they are based on completion prices agreed several months earlier. So today's Land Registry numbers could reflect the impact of the half point rise in rates ordered by the Bank of England in June.
The market has been suppressed by the steep rise in borrowing costs since December 2021 which has pushed up the cost of fixed rate mortgages and hit the confidence of buyers.
However, today’s better than expected inflation figure - the Consumer Prices Index fell to 3.9% - makes it more likely that interest rates will start to fall within the next six months, giving a boost to the market.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Swap rates, which underpin the pricing of fixed-rate mortgages, have dropped significantly over the past month.
“Better-than-expected inflation news this morning has pegged them back further, with five-year Swaps falling to 3.45 per cent, while two-year Swaps are slightly higher at 4.11 per cent.
“The next move in base rate is almost certainly downwards; the question is how soon? Increasingly, speculation suggests May or June, which will come as welcome news for hard-pressed borrowers.
“In the meantime, lenders continue to reduce their mortgage rates, and will be keen to get 2024 off to a good start after a disappointing 2023. If mortgage rates continue to fall and borrower affordability continues to improve, we would expect transaction numbers to improve.”
Alex Lyle, director of Richmond estate agency Antony Roberts, says: “As there isn’t the depth of demand in terms of enquiries from prospective buyers compared with earlier in the year, property must be priced at the right level and these numbers reflect that.
“Our business is all about confidence and three consecutive holds in interest rates have been extremely welcome, helping buyers plan for the future.
“Transactions are taking time and negotiations can be drawn out. But there are opportunities for buyers who are brave enough not to sit on the fence, given that competition is more muted and vendors more realistic at this time of year.”
Bob Singh, founder at Uxbridge-based broker Chess Mortgages, said: “This data still shows the fallout from the mini-Budget that sent the property market into a huge tailspin. However, 2024 is shaping up to be a better year for the property market as inflation continues to drop and the likelihood of a base rate cut earlier in 2024 increases. In recent months, property prices have been shored up due to strong demand and weak supply. Meanwhile, tenants have borne the brunt of some brutal rent rises as landlords have been forced to hike rents. With over a million cheap mortgage rates ending next year, we are still not out the woods but the prospect of a rate cut has brought some Xmas cheer to the markets.”
