House prices fell in all but six of London’s 33 local authority areas last year as the capital’s property was hit harder than any other region of the UK by soaring interest rates, new analysis reveals today.
The average London house price dropped by 5.2% in 2023, from £535,711 to £508,037, knocking £27,674 off the value of a typical home in the capital, according to latest Land Registry figures.
That compares with just 1% for the UK as a whole. But within that overall figure, the performance of individual boroughs varied enormously, according to data today compiled by agents Benham and Reeves. Prices fell in 26 boroughs and the City of London with the biggest declines seen in the most expensive neighbourhoods.
The biggest single fall was in Westminster, where the average cost of a home plummeted almost 21%to £877,733.
The loss in value in a single year, £232,015, is close to the average price of a home in many parts of the UK.
In Kensington and Chelsea, the average price fell by 17.4%, or £236,346, while the City of London saw reductions averaging 16.6%, equivalent to £160,221. In Hammersmith and Fulham house prices fell by 13.2%, or £101,522.
However, six boroughs did buck the overall trend to record small increases in prices over the course of a year marked by severe pressure on homeowners as they were forced to remortgage at far higher rates when fixed rate deals expired. Londoners have by far the biggest mortgages of any UK region with the average first time buyer home loan in the capital standing at £335,000.
Richmond upon Thames recorded the biggest rise in property prices with the average up 2% to £15,093.
It was followed by Camden on 1.6%, Newham with 1.1%, Islington (0.8%) and Hackney and Lewisham (both on 0.7%)
Benham and Reeves director, Marc von Grundherr, said: “With house prices cooling during the later stages of last year, it’s the London market that has naturally been hit the hardest given the far higher cost of homeownership, with all but a handful of boroughs experiencing a decline.
Largely speaking, this decline has been marginal in the grand scheme of things and the vast majority of boroughs have only seen slight corrections… However, the damage done across the prime market, in particular, has been far more pronounced, although the silver lining is, of course, that there’s never been a better time to buy at the very high-end of the London housing market.”
The figures came as latest data from property portal Rightmove showed prices starting to recover in the first few weeks of the year after mortgage rates fell sharply at the end of 2023 on hopes that the Bank of England will soon start lowering the cost of borrowing.
According to Rightmove, asking prices jumped 2.8% in London in February.
London house prices fell by 4.8% in 2023, faster than any other region and close to a 15-year high, but nowhere near the property market crash that was predicted.
According to Land Registry data, the average London house price was £508,000 in December 2023. While that marks a fall of £25,000 on a year-on-year basis, it’s a long way from predictions of a double-digit percent crash for the capital’s property sector.
House prices remained surprisingly resilient as mortgage rates soared last year, in response to Bank of England rate hikes that were needed to bring inflation back under control.
The average price is little changed from last month’s data, when values were down 5.5% year-on-year.
In the UK as a whole, prices were down by 1.4%, which again was a much smaller drop than many experts had predicted.
The figures from the Land Registry are based on completed sales, and so tend to lag many other measurements of house prices, such as those from lenders Nationwide and Halifax. The latest data from the two mortgage giants shows that a house price recovery is firmly underway, with four months of rising prices. Lower-than-expected January inflation figures could lead to a further recovery in house prices, as mortgage lenders could reduce rates in anticipation of the Bank of England cutting its own base rate soon.
Marc von Grundherr, Director of Benham and Reeves, said:“The decline in house prices seen during the latter stages of 2023 has been marginal in the grand scheme of things and they remain there or thereabouts when compared to the record peaks seen during the pandemic market boom.
Of course, the London market has naturally been hit the hardest given the far higher cost of homeownership and the greater borrowing requirements will also mean that it trails the rest of the nation when it comes to a rebound in positive property price growth. “
However, when it does turn, it turns quickly and it’s only a matter of time before the sleeping giant of the UK property market awakens.”
Jason Tebb, president of OnTheMarket, said: “December’s slight uptick in average property prices is in line with other surveys, reflecting softer transaction volumes as the market returned to seasonality and only the most committed of buyers and sellers eschewed the festivities in favour of moving.
“Since the start of the year, the picture has improved with falling mortgage rates encouraging buyers and sellers to return to the market. Stock levels and new enquiries have risen as market stability and confidence has been boosted by expectations that the Bank will start cutting interest rates soon.
“While inflation is still double the Bank’s target, it was softer than expected in January and is forecast to continue edging downwards, although there will be bumps in the road. Demand and activity levels are expected to strengthen but with affordability impacted by last year’s successive rate rises and the higher cost of living, sellers should take advice and come to market at a sensible level.”