Annual house price growth in the UK has fallen to its weakest level in almost seven years as the slump in Britain’s residential property market spreads beyond London.
House prices in the south-east of England fell for the first time since 2011, the Office for National Statistics said on Wednesday, while London prices dropped almost 4 per cent in February on a year earlier, their heaviest fall since the end of the financial crisis.
UK house values dropped 0.8 per cent in February compared with the previous month, dragging prices to their weakest annual rate of growth since 2012. British house prices were just 0.6 per cent higher in February than a year ago, slowing from 1.7 per cent growth in January.
Evidence of a wider slowdown in prices outside London, where home values have been under pressure since last summer, will raise concerns that the UK’s post-financial crisis housing market boom is fast coming to an end. House prices in the south-east of England dropped almost 1.8 per cent on a year earlier.
Estate agents reported that buyers had become more cautious because of uncertainty around the end of the Brexit negotiations, with the UK’s plans to leave the EU also deterring buyers from overseas. House prices also remain at a relatively expensive level on a long-term basis compared with earnings.
Anne Bowden, housing partner at law firm Pinsent Masons, said the “death of buy-to-let, increased stamp duty and the prospect of interest rate hikes combined with Brexit instability makes the downward trajectory of house prices predictable. This decline looks set to continue for the foreseeable future.”
The average UK house price was £226,000 in February after peaking at £232,000 in August 2018, from when monthly declines began to occur. In London, the average house price was £460,000, almost four times the price of the average home in the north-east of England at £125,000, but down about £24,000 from the previous peak in July last year.
The ONS figures showed that the prices of flats and maisonettes were the weakest on average across the UK — compared with other sorts of properties such as detached homes — with values starting to fall on a yearly basis at the end of last year and accelerating in February.
Henry Pryor, a house buying agent, said developments in the London market would “ripple out over the next 12-18 months. Whilst the party may be over in the capital the drink is still flowing in places like Manchester and Leeds. But beware, the hangover will be just as severe.”
There was better news for the north-west of England, which showed the highest annual growth in February, according to the ONS. Prices rose 4 per cent in the year to February.
Mike Hardie, head of inflation at the ONS, said: “Growth in Wales and the west of England was offset by a sustained fall in London and falling prices in the South East for the first time since 2011.”
The figures are compiled by the ONS from Land Registry data.