London house prices defy national mood with drop in July

HOUSE prices in London backtracked in July as uncertainty around the tax plans of the new Labour government weighed on sentiment in the capital.

The average price of a home fell 0.4 per cent in the year till July to £521,000 (S$891,747), according to Land Registry data reported by the Office for National Statistics (ONS). It came as prices in the city posted their first monthly decline since March.

The numbers suggest little relief ahead for the London market, which is still trying to shake off a surge in interest rates last year. There are now fears that Chancellor Rachel Reeves could announce increases to capital gains and inheritance taxes in her budget on Oct 30 to fill a fiscal hole she said was left by the Conservatives.

The souring mood is particularly visible at the top end of the market. A report from real estate company Knight Frank showed London home sales declined by over a fifth compared to levels seen in 2022 to 2023, due to budget fears putting off both buyers and sellers.

London house prices are still around 4 per cent below their peak around two years ago, according to ONS figures, which are not adjusted for seasonal factors.

Average UK home prices increased by 2.2 per cent in the year through July, a modest slowdown from the month before, the ONS also said. Prices rose 0.6 per cent from June, the sixth straight month of increase – a sign the market overall is recovering.

“It is reassuring to see further progress within the housing market as we continue to witness a consistent trend of growth as the year plays out,” said Nathan Emerson, chief executive officer at Propertymark, which represents estate agents. “Overall, 2024 has proven to be transformative for the housing market with it facing a myriad of challenges at the start of the year and gathering pace to a far more upbeat performance as demonstrated by these latest figures.”

The official data usually lags behind private indicators and does not capture the impact of the Bank of England’s decision to cut interest rates for the first time since the pandemic in August, which likely helped boost housing market activity.

Halifax showed house prices rising in August, while Rightmove figures indicated asking prices for UK houses increased at double their long-term average pace in September. BLOOMBERG