London home market worst in UK as price dips

London • London was the worst-performing home market in the UK last year, for the first time in more than a decade and may be stuck there.

Nationwide Building Society said values in the capital fell 0.5% — the first full-year decline since the 2009 recession — lagging behind a 2.6% increase nationally.

It’s the first time since 2004 that the city has ended the year as the slowest-growing region.

The weakness may persist in 2018, with property website operator Rightmove and the Royal Institution of Chartered Surveyors both predicting price declines in the city.

Nationally, values will on average increase, though Nationwide sees only about 1% growth.

That compares to a 4.5% rate recorded in 2016.

In December alone, Nationwide said UK house prices rose 0.6% from November, to an average £211,156 (RM1.15 million), though monthly figures can be volatile.

Samuel Tombs, an economist at Pantheon Macroeconomics, said the figures may be “tentative evidence” that a tax change late last year has supported the market.

In its budget, the government abolished stamp duty for first-time buyers up to a certain price limit, a move aimed at helping aspiring homeowners.

The property slowdown seen in recent years is due to the market getting buffeted by factors including an inflation squeeze, Brexit uncertainty and tax shifts.

Bank of England data yesterday showed that approvals for mortgages were little changed in November and below the six-month average.

That’s the same month the central bank raised interest rates for the first time in a decade, which added an additional headwind to the market.

London has taken the brunt of the slowdown after years of surging values that stretched affordability for first-time buyers.

It’s also been skewed by prime property, with some of the biggest declines seen at the top end of the market.

While prospective typical home- buyers in London are in the top 10% of the income distribution, the scale of the down payment needed is still daunting.

Nationwide estimates it would take around 10 years for a first-time buyer in the capital to save up a deposit for a property — based on a 20% downpayment and the average price paid by such buyers.

That compares to eight years in most other regions. — Bloomberg