London Flat Prices Plummet, Eroding £71,000 in Value Over Four Years

Prices for flats in inner London have fallen by £71,000 over the past four years, with a significant 8.4% decrease recorded in the last year alone, according to the latest Land Registry figures. As of July, the typical flat in inner London is valued at £522,839, marking a consistent decline since September 2022 when the average price stood at £594,135.

This drop in the inner London market contributes to an overall annual decline of 3.3% for average London homes, though properties in outer boroughs have shown more resilience. Buying agent Jonathan Hopper, chief executive of Garrington Property Finders, noted that while this period is challenging for sellers, declining prices are beginning to attract opportunistic buyers.

"No-one rings a bell when a falling market hits the bottom, but after months of correction it appears that London prices are now bumping along the seabed rather than sinking," Hopper stated. Inner London flats are now selling for £47,736 less than they were a year ago.

The downturn in London is impacting the national average for UK property values, which have seen a modest 1.4% rise (£4,000) in the 12 months to July, reaching £273,000. In contrast, the South and East of England are experiencing minimal price changes, with the South West showing a 0.2% decrease and the South and East of England reporting increases of 0.2% and 0.5% respectively.

However, significant growth is occurring in other parts of the country. The North West has seen a 4.4% increase in typical home values, while the North East has experienced a 4.9% rise. Yorkshire and The Humber report a 3% increase, and Wales has seen a 2.6% rise. Northern Ireland continues to lead with a 9.2% increase in house prices year-over-year.

Hopper attributes the north-south divide in the UK property market to two primary factors. Firstly, the oversupply of homes in the south allows buyers more bargaining power. Secondly, rising mortgage interest rates are making it more difficult for buyers, particularly in high-value southern areas where mortgage borrowing is more common. "In the south’s high-value areas, where buyers are especially reliant on mortgage borrowing, each increase in mortgage interest rates makes more homes unaffordable for buyers," he explained.

The situation for sellers in London and southern England could worsen, as major banks have recently announced increased mortgage rates. This follows recent inflation figures rising to 3.1%, above the Bank of England's 2% target, leading to concerns about future interest rate decisions. Mark Harris, chief executive of mortgage broker SPF Private Clients, noted that rising inflation, partly fueled by geopolitical tensions, suggests that borrowers should anticipate higher mortgage costs. Despite the Bank of England holding the base rate steady in its last meeting, volatile swap rates have prompted several lenders to increase their mortgage pricing, with expectations that others will follow.