House prices in London have slipped by 1.5 percent over the past year as a series of adverse political and economic factors have combined to cause an ongoing stand-off between potential buyers and sellers, according to data from Rightmove on Monday.
Still reeling from two successive hikes to stamp duty in recent years which particularly hit the higher value prime central London (PCL) property market, appetite to transact has also been buffeted by Brexit-inspired political uncertainty, domestic economic jitters and a surplus of luxury new build developments gearing up to enter the market.
Additionally, sky-high valuations, which in the U.K. now stand at around six times average earnings and are closer to double that ratio in the capital, have contributed to the malaise.
The market-wide story in PCL continues to be dominated by low volumes, Adrian Black, founder of proptech estate agent YOUhome, told CNBC via email on Monday.
“Fewer people are currently looking but those who are in the market are keen to buy. Prices are holding up in niche and highly sought after areas as well as for best-in-class properties yet gradually softening in other categories,” says Black, noting that the short-term outlook remains consistent with that diagnosis.
While traditionally spring has been considered the optimal time for activity to return to the housing market, Henry Pryor, buying agent and property market expert, told CNBC via email on Monday that uncertainty generated by Theresa May’s unexpected announcement of a general election this summer will likely mean trading volumes and prices both remain under pressure this season.
“The Spring markets for the past three years have been destabilised by big political events and 2017 is going the same way. We still have an uncomfortable number of ‘icebergs’ ahead including another Budget, the ongoing divorce from Europe and the trickle of changes to the tax arrangements of buy-to-let landlords or residential property investors as they perhaps should be called,” Pryor gloomily noted.
“On the positive side, competition in the mortgage market is likely to continue at least until Christmas making money both cheaper and more available but we are very close to zero and this will eventually dry up. When it does the impact could be significant,” he added.
In addition to election uncertainty, mutterings late last week suggesting that the tax regime may be headed for further adverse changes are likely to further shrink potential buyers’ enthusiasm to jump into the market in coming weeks.
“All but the most motivated of buyers and sellers will sit on their hands as all the parties appear to be hinting at tax rises to come. The threats to the housing market especially in London and the South East outweigh the positives needed to halt the slide in deal prices,” Pryor concluded.
The data comes amid other evidence of slowing consumer spending in the U.K. with surprisingly poor retail sales released last week and expectations that resurgent levels of inflation will persist. These negative signals are, however, mitigated by continued strength in the jobs market and signs that sentiment is broadly holding up.
U.K. February mortgage data also showed an annual decline of 5.6 percent for approvals with analysts at Jefferies saying they anticipate a further fall in March given difficult to match comparable figures from last year before an improvement in trends returns in subsequent quarters.