High mortgage rates dampen London housing market
The rate of house price growth in London is starting to slow, suggesting that the cost of living crisis is starting to bite, thanks to the exorbitant mortgage rates that are dampening the London housing market. However, despite the economy being plagued by inflation and headed for recession, house prices continue to remain close to all-time highs.
According to multiple media reports and the Office for Budget Responsibility (OBR), house prices are expected to fall by nearly 10 percent over the next couple of years, largely driven by higher mortgage rates and the wider economic downturn. Earlier in a tweet on Thursday, OBR said house prices are forecast to drop by 9 percent between Q4 2022 and Q3 2024.
That eased the annual rate of increase from 7.3 percent to 6.9 percent but prices are still only £3,000 below the record £547,319 reached in August. The biggest rises in London were generally in zone two areas where there is strong demand from young professionals topped by Brent, where prices went up 14.1 percent, Southwark (14 percent), Greenwich (13 percent) and Harrow (12.6 percent).
The market also has been squeezed higher because of a severe lack of stock and a stampede of buyers keen to get on the ladder before mortgage rates rise to unaffordable levels. Latest data from the Land Registry show the average price dipped 0.6 percent to £544,113 in September, the biggest monthly fall since July last year. After a very hectic couple of years in the London housing market, it seemed initially in 2022 that the London housing market was returning to more normal trading patterns, although a shortage of homes for sale had kept prices keen.
Conversely, the economic and fiscal outlook was released as Chancellor Jeremy Hunt indicated that the stamp duty cuts previously announced in the mini-budget will remain in place but only until March 31 2025. Stamp duty applies in England and Northern Ireland. Meanwhile, Institute for Fiscal Studies director Paul Johnson in a tweet said Mr Hunt is abolishing “about the only good policy” from Kwasi Kwarteng’s autumn mini-budget by removing the stamp duty cut in 2025.
Industry experts are expecting falls in prices next year though the change in sentiment is slow to appear in the Land Registry figures which reflect prices agreed several months earlier.
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