Property prices in central London have fallen by 24 per cent in real terms over the past five years, according to research highlighting the effects of the pandemic on demand in city centers and the affordability of housing in expensive parts of the country.
Zoopla’s house price index for December showed that prices in London’s WC postcodes had fallen by 7 percent in nominal terms since 2017, while those in EC postcodes had fallen by 2 percent. Taking into account inflation in both central zones, prices remain a quarter lower in real terms.
The trend will continue next year, according to researchers at the real estate website. Prices in the capital were likely to fall between 5 and 8 percent, compared to the UK’s forecast of 5 percent, it said.
Richard Donnell, executive director at Zoopla, said: “Higher mortgage rates are hit hardest where house prices are highest, so London will suffer more than average in 2023.”
Housing demand has halved this year, Zoopla said, as activity in the first half slowed in the second half, as mortgage rates skyrocketed amid the market turmoil following the government’s “mini” budget in September. When measuring demand, Zoopla counts potential buyers who contact realtors about specific homes, rather than users of the website’s properties.
“We expect buyers to re-enter the market in the new year, but they will be much more cautious and price sensitive,” said Donnell.
Due to the gloomy outlook for the economy, higher interest rates and unemployment, other housing market economists are warning of falling house prices. For example, Capital Economics predicts prices in the UK will drop 8.5 percent in 2023, with a further 2.5 percent drop in 2024. Halifax forecasts an 8 percent drop, while Nationwide forecast a 5 percent drop this week . .
However, Donnell added that several factors suggested larger declines were unlikely, including more stringent affordability tests among mortgage lenders over the past decade and forbearance for those falling into arrears as higher interest rates drove up lender profits.
“Banks are going to make a lot of money over the next 12 months and they are supporting their current mortgage customers,” he said.
Looking back over the past five years, the survey found that prices had risen fastest in lower-cost areas in the Midlands and northern England, with an increase of 47 per cent in Oldham and 42 per cent in Bolton and Wolverhampton since 2017.
Zoopla expects several trends of recent years to reverse as buyers become more selective and bargain harder as their revenues and risk appetite come under pressure.
It found evidence that the pandemic-fuelled trend for people to move from urban areas to coastal or rural homes was already “gaining steam”. Coastal locations in the east of Kent, Torquay and Portsmouth and larger parts of the Lake District and Mid Wales saw above-average price declines this year. All hotspots for buyers during the lockdown.
Helen Morrissey, senior retirement and retirement analyst at investment platform Hargreaves Lansdown, said the research showed affordability would be key to determining the market’s course next year. “While demand is falling in rural and coastal areas, there is a demand for more affordable urban areas such as Milton Keynes, Bradford and Coventry as people move back to office work.”
The price differential between flats and houses accelerated during the pandemic as people looked for more spacious properties and concerns about flats were heightened by cladding and leasehold issues. The average house price is 2.1 times the fixed price, a record in 20 years.
But Donnell expects a resurgence in demand for apartments in 2023, as buyers seek better value for money and any problems with cladding-related flats – only a small fraction of the total – are alleviated by changes in government policy. government and lenders.