Press Release

House prices experience largest fall since 2009 while rental market cools

New analysis published today by Centre for London has painted a mixed picture of the capital’s residential property market, revealing a slowdown in sale prices over the last quarter of 2017, a sharp downturn in transaction volumes, and a cooling rental market.

The analysis, published in The London Intelligence, found that:

  • London’s property prices fell 4.1 per cent in the year to November 2017, the largest fall since August 2009, according to Acadata figures used by The London Intelligence.
  • The sharpest fall in property prices was for flats (7 per cent); prices for terraced houses also fell (2 per cent) while prices rose for semi-detached houses (4 per cent).
  • Residential property sales across London have slowed, with sales of one-bed flats falling by more than 25 per cent year-on-year (three months to October).
  • New housing supply reached a 5 year peak in 2016/17, with nearly 40,000 homes being completed (including conversions and change of use).

Market data indicates that London’s rents also fell slightly in the year to December 2017, the slowest annual growth since October 2010. However, rents for smaller flats and houses continued to rise, while larger properties saw rents fall.

The London Intelligence also highlights a number of deeper issues in London’s rental market. It shows that the proportion of income spent on renting remained relatively constant over the last three years, at between 30 and 31 per cent on income. As rents have until recently been rising faster than wages, this suggests that hard-pressed renters have been trading down to avoid increasing expenditure on rent.

The analysis also shows pressure on younger renters in London. A higher proportion of individuals renting in London are in their twenties compared to the whole of England and Wales (49 vs 44 per cent) and thirties (31 vs 27 per cent). The youngest renters (on average) reside in zones 1 and 2, perhaps indicating that younger people are more willing to trade-off location (and often quality) and pay higher prices.

Richard Brown, Research Director at Centre for London, said:

“The headline of stagnating house prices in London is becoming familiar, but these figures help us look behind the headlines. Significantly fewer flats are being sold, particularly in some prime central London markets, and sale prices are falling, while demand for larger properties remains buoyant.

“But prices have raced ahead of earnings for so long that this slackening market will not yet make much of a difference for hard-pressed Londoners, especially since rents for flats and smaller houses continue to rise.

“Housing supply reached a record level over the past year, but will need a further boost to meet the new draft London Plan targets. We don’t yet know what impact the slowdown in house prices will have on supply.”

Stephanie Barbabosa, Head of Build to Rent, International Operations and Lendlease, said:

“This analysis reiterates the clear need to deliver homes in London across different tenure types, from homes for sale and private rental to shared ownership and affordable homes.

“In response to this growing range of needs, we recently announced our move into the Build to Rent sector, which will create homes for Londoners designed to be rented, from the start. The idea is that we’ll be able to deliver more homes faster, and invest more in places that will bring socio-economic benefits, whether that’s new jobs and public amenities and affordable homes for local people. We hope this will usher in a new renting era in London.”