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Antony Antoniou – Luxury Property Expert

Property Prices in London beginning to fall significantly

Property Prices in London beginning to fall significantly

London Property Market Under Strain: Homeowners Slash Asking Prices by £23,000


The London property market is undergoing a seismic shift as homeowners confront the ripple effects of soaring mortgage costs. With asking prices plummeting by an average of £23,000, the capital city is grappling with more profound challenges than any other region in the country. Meanwhile, South West England is bracing for the most substantial property price drop on the horizon.

London: Bearing the Brunt of Rising Interest Rates

In the wake of escalating interest rates, London homeowners have had to take drastic measures. Data from Rightmove reveals that asking prices for London properties have shrunk by 3.4% since their zenith in May, the most substantial decrease in any region. The surging interest rates are putting immense pressure on the property market, leading to significant adjustments in asking prices. The average price tag for a home in London, which stood at £696,477 merely three months prior, has dipped to £672,961 as of August.

Mortgage Rates Triple: A Tough Pill to Swallow

The ripple effect of rate hikes initiated by the Bank of England at the close of 2021 has led to staggering implications for mortgage rates. The once-modest average rate of 2.29% for a two-year fixed-rate loan has surged to a staggering 6.73%, as reported by Moneyfacts. This translates to an eye-watering 57% increase in the monthly cost of a typical £200,000 loan, amounting to an additional £503 burden. The ramifications are most pronounced in markets where homes are already exorbitantly priced and buyers rely heavily on mortgage financing.

London’s High-Value Market: Feeling the Heat

The capital’s high-value property market leaves it vulnerable to severe price adjustments during times of escalating mortgage costs. Marcus Dixon, a property consultant at JLL, asserts that London’s market dynamics make it susceptible to more substantial price reductions. As mortgage rates soar, potential buyers grapple with affordability, prompting sellers to revise their expectations.

South West England: Anticipating the Biggest Slide

While London grapples with its challenges, South West England is poised for a pivotal shift. Despite a shorter timeframe, asking prices in this region have descended by 3.2% since hitting a record high. The South West market enjoyed a surge of investment post-lockdown, which resulted in rapid growth. However, this swift ascent has created space for a more pronounced fall. The region’s historical allure for holiday home buyers has also taken a hit, as discretionary purchases, including second homes, slow down.

Nationwide Discrepancy: Market Expectations vs. Reality

The disparity between seller expectations and market realities is evident in asking prices, which act as early indicators of market trends. Nationwide data indicates that UK sale prices, tied to mortgage approvals, reached their peak the previous summer and have since contracted by 3.1% year-on-year. However, Rightmove’s data suggests a milder decrease of 2.1% in asking prices since their peak in May. This misalignment highlights the lag in sellers adjusting to a downturn that commenced nearly a year earlier.

Navigating the “Expectation Gap”

Industry experts attribute the discrepancy between seller expectations and market trends to an “expectation gap.” Many property agents initially priced homes optimistically, assuming a continued growth trajectory. However, with rising interest rates affecting affordability and eroding consumer confidence, a pragmatic approach to pricing has become imperative.

JLL’s Forecast: A Shifting Landscape

JLL’s prognosis foresees a peak-to-trough decline of 10% to 12% in house prices, including a 6% reduction within the current year. Previously projecting a bottoming out of prices in spring 2024, this timeline is increasingly optimistic given the evolving market dynamics. The property market’s landscape is undergoing rapid changes, demanding flexibility and adaptation from homeowners and industry professionals alike.

Conclusion: A Market in Flux

As the London property market grapples with the aftermath of soaring mortgage costs, the landscape is undergoing significant changes. Homeowners are slashing asking prices in response to mounting pressure, with South West England anticipating the most significant decline. The housing market’s challenges underscore the need for a realistic approach to pricing and adaptation to the evolving financial landscape. With JLL’s projections painting a shifting picture, the property market’s trajectory remains uncertain, requiring stakeholders to navigate with caution and strategic planning.

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