The latest data from Home.co.uk shows falls in six out of ten of the UK's most expensive areas, all of which are in central London.
Average sales prices fell by 8% in swanky Belgravia over the 12 months to September 2014. Over the same period, prices fell in Westminster by 6.3%, in Soho by 5.7%, in South Kensington by 4%, in Chelsea by 3.5% and in Charing Cross by 2.7%.
Tightening mortgage credit in the wake of the Mortgage Market Review as well as an increase in supply are among key factors in this price drop in the capital's most expensive, and arguably most overheated, property markets.
House price inflation is now cooling across all of Greater London. Across the capital region, the average asking price fell by 0.1% between August and September whilst average prices rose by just 0.2% across England and Wales. Thus far only the most expensive parts of London are suffering serious price deflation, but it may well spread.
This latest trend in London's property market follows a period of dramatic increases in house prices in the capital, fuelled by low interest rates and foreign property investment. Prime property was the first segment to recover following the credit crunch in 2007. A wave of soaring prices then moved out from prime central London as buyers refocused on less expensive areas.
The average asking price in London has risen by 9.8% in the last six months. Over the last year, some parts of the capital saw price rises far above the average of 19% for Greater London. In Stratford, the average sales price of a two-bedroom property soared by 44.9% in the 12 months to September 2014 while in West Norwood, the same property type saw a price rise of 44.2% over the same period.
Outside of the M25, only Slough showed comparable price appreciation. In the 12 months to September 2014, the average price of a two-bedroom property in the Berkshire town rose by 44.3%.
Doug Shepherd, director of Home.co.uk, commented:
“Overall, it's been a simply staggering year for property prices in London. Some areas have far exceeded the 19% rise overall for Greater London, whilst others have underperformed relative to this figure.
The list of the top 5 locations reveals some jaw-dropping gains. Moreover, it is highly likely that many owner-occupiers in these locations earned less than their homes did over the course of the last year.
However, when prices rise at an unsustainable rate, boom can quickly turn to bust. Prime London prices are falling and the middle-income areas that have seen the biggest price hikes this year are likely to suffer the same fate.”
