London Home Prices See Unexpected Autumn Spike Amid Wider Market Slowdown

Asking prices for homes newly listed on the market in London experienced a surprise increase of 2.5% in the last month, defying a broader national trend of slight price declines. In the most affluent areas of the capital, inner London, prices saw an even sharper rise of 3.9%, according to data from property portal Rightmove.

This surge in London comes as sellers in more affordable regions of the country have reduced their asking prices. The North East saw a 2% drop in asking prices, Scotland fell by 1.9%, and the North West decreased by 0.6%. Nationally, asking prices fell by 0.1% between September 12 and October 10, though they remain 1% higher compared to the same period last year.

The recent rise in London prices follows a subdued summer market, where asking prices across the capital had fallen by 6% in July and August. Despite the latest uptick, new asking prices nationally are still 1.7% below their level of a year ago, a steeper decline than in any other region.

Sellers often strategically list their properties in the autumn, anticipating a larger pool of active buyers. Marc von Grundherr, director at Benham and Reeves estate agents in London, noted an "enough is enough" sentiment among some London sellers who believe their property remains a strong asset, especially if they have no immediate need to sell at a lower price.

Mortgage Rate Impact Elsewhere

The broader property market is showing signs of being affected by rising mortgage rates. Since February, average new mortgage payments have increased by approximately £250, largely attributed to lenders raising rates in response to inflation concerns, partly driven by the conflict in Iran. Rightmove data suggests these increased costs are deterring buyers in price-sensitive markets that had previously shown resilience.

Colleen Babcock, a property expert at Rightmove, stated that the rapid increase in mortgage rates is significantly impacting buyers' budgets. "We're now seeing mortgage rate rises feed through to seller pricing in many of the cheaper parts of Great Britain, where prices had been more resilient this year," Babcock said. "It's an early sign that higher mortgage costs are putting pressure on affordability even in markets with lower property prices, affecting the areas and types of property that buyers can afford."

The market activity reflects these pressures. The number of agreed sales is down 8% compared to a year ago, and the number of potential buyers contacting agents has decreased by 9%. This challenging environment for sellers is compounded by the total number of homes available for sale being at its highest level for this time of year since 2014.

Rightmove's indicators suggest that some London sellers might be overestimating buyer demand, as 38% of homes are experiencing price reductions, and it takes an average of 78 days, or 11 weeks, to secure an offer.