LONDON — After decades of runaway growth, London's housing market is finally grinding to a halt, according to government figures published on Tuesday.
The average London house price fell by 1.5% in March to £471,742, according to the Office for National Statistics. The 1.5% fall equates to an annual growth rate of just 1.5%.
The ONS figures are the latest indication that one of the greatest asset run-ups in British history is reaching a standstill.
Only a year ago, London house prices were rising by nearly 15% a year, and at their peak in 2000, prices were rising by 28.3% annually.
London prices have been affected by a number of factors including stagnant wage growth, Brexit-related uncertainty, a volatile sterling, and stretched valuations.
'It’s very hard to see central London prices recovering'
The slowdown isn't just confined to London though. The average UK house price fell by 0.6% in March to £215,848, equating to an annual growth rate of 4.2%. Prices fell in every region except for Wales, where prices grew by 1.4%, and the West Midlands, up by 0.3%.
Samuel Tombs, chief economist at Pantheon Macroeconomics, said in a note on Tuesday: "It's now abundantly clear that the [UK] housing market is in its softest patch for several years."
He said the slowdown in the capital has been concentrated in inner London, where prices were up just 1% year-on-year, while prices in outer London rose at a similar rate to the rest of the UK (5% and 4.2% respectively).
He said: "Looking ahead, it’s very hard to see growth in central London prices recovering, given that valuations look stretched, the financial sector is facing an uncertain post-Brexit future and volatility in sterling is undermining property’s safe-haven appeal for overseas investors.
"Across the rest of the UK, house price growth looks set to remain dampened by sluggish growth in wages. As such, we still expect year-over-year growth in national prices to slow to just 2% by the end of this year."
Jonathan Hopper, managing director of Garrington Property Finders, said: "London finds itself in a position it is unaccustomed to – close to the bottom of the pile."
"The chronic shortage of supply is still propping up prices in many areas and mitigating the slowdown. But this snapshot of a slowing market – taken before the election announcement – confirms what many in the industry had feared."
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