House prices in London have fallen for the first time in nearly four years, and will continue to do so, according to a leading property market barometer. After the longest period of positive sentiment recorded by the Royal Institution of Chartered Surveyors (RICS), stretching back to January 2011, the industry body has finally reported a drop in values in the capital. While the nationwide group of estate agents and surveyors, who are polled on a monthly basis, expect growth across the rest of UK over the next three months, they forecast values to continue to decrease in London as buyer demand falls along with new vendor listings, leading to lower transaction levels.
Looking 12 months ahead the report predicted a 2.1pc house price rise for the UK regions and a 1pc rise in London.
“A growing sense of caution seems to have taken a particular toll on the London market where buyer demand contracted more significantly than elsewhere in September, falling for the fifth consecutive month,” the report read.
For the rest of the UK, the price balance fell from 39 to 30 on the sentiment index this month – the lowest reading since June 2013 as the combination of strict new mortgage rules, nervousness ahead of rising interest rates forecast for the spring, and high prices have dampened demand.
Buoyed by cash buyers and a lack of supply, London is now expected to slow as over-inflated prices force workers to buy in the home counties or remain in rental accommodation. The prospect of mansion tax is also slowing the flow domestic and overseas investment into the city.
Charles Puxley, estate agent from the Chelsea branch, Jackson-Stops & Staff, said: “Traditionally September is a busy month for instructions in central London. This has not happened this year and there is notably very little activity at just over the £2m mark. Mansion tax it seems to be a real worry. It will decimate London prices.”
Further out in Enfield, Essex, Keith Barnfield of estate agents, FRICS, said: “Activity is yet to pick up after the holidays. More properties are staying on the market for longer and offers are being made below asking price.”
This new poll followed a report from the property portal, Zoopla, which shows that UK-wide homeowner confidence has fallen to a 15-month low.
The survey of 6,746 homeowners found that the proportion expecting property prices in their area to increase over the next six months has fallen from 92pc three months ago to 88pc, the lowest level since July 2013.