London house prices are falling at the fastest pace since the depths of the recession almost a decade ago, with the capital’s most expensive areas seeing the biggest declines.
Average prices fell to 593,396 pounds ($820,000) in January, an annual decline of 2.6 percent, according to a report published by Acadata on Monday. That’s the most since August 2009.
The city will be the weakest performing market in the country over the next five years, said Lucian Cook, head of residential research at broker Savills Plc, as a decade of soaring prices means London’s more exposed to political and economic uncertainty, the prospect of interest rate increases and mortgage loan limits.
Business has been slow in “a lot” of offices since the start of the year, though there are more deals being done in some central outlets, Simon Aldous, a director at Savills, said in a survey published last week by the Royal Institution of Chartered Surveyors. Offers for homes are often more than 10 percent below asking prices, James Gubbins, a partner at Dauntons in Pimlico, said in the poll.
“Uncertainty over Brexit is the issue,” Gubbins said.
London’s highest-priced boroughs were the biggest losers over the last year, while the largest single drop was recorded in Wandsworth, down almost 15 percent. The borough has seen a sharp surge in the number of expensive apartments being built there that Londoners don’t want or can’t afford.
Increased taxes on landlords and loan limits in Singapore have also helped to damp demand from overseas, leading to a record number of homes under construction in the U.K. capital that have yet to find a buyer.
Nationally, slower economic growth and faster inflation since the Brexit vote are weighing on the market, while the Bank of England is raising interest rates, adding to the downward pressure.
Media coverage of the slowdown, including headlines about falling house prices, is making consumers nervous and holding back demand. New buyers registering with real-estate agents fell for an 11th month in February, RICS said last week.
Hedge funds are again raising their shorts against homebuilders as sentiment changes. Firms including Millennium and Marshall Wace have increased wagers against companies such as Bovis Homes Group Plc, Taylor Wimpey Plc and Berkeley Group Holdings Plc in recent weeks.
The capital dragged down nationwide growth in February to 0.5 percent. Even excluding London and the southeast, the 2.5 percent annual rate of increase in January remained well short of the pace seen in recent years.
The housing slump may also be weighing on consumer spending, which fell for the ninth month in 10 in February, according to a separate report by Visa. Households spent the least on recreation since 2010.