London house prices fell year-on-year for the first time since the depths of the slump that followed the financial crash, official figures reveal today.
The average value of a home in the capital dropped by one per cent to £471,986 in the year to February, wiping off nearly £5,000, according to latest data from the Land Registry.
It is the first time that the London property market has been in negative territory since September 2009 when it was still recovering from the global financial system’s “near-death experience” triggered by the collapse of Lehman Brothers.
Emergency action by the Bank of England to slash interest rates to 0.5 per cent in March 2009 stabilised the market but also fuelled a boom that has seen prices spiral out of reach for most first-time buyers.
A separate announcement from the Office for National Statistics showed the rate of inflation dropped more rapidly than expected last month to 2.5 per cent, from 2.7 per cent in February.
Today’s Land Registry figures show that property prices slumped by 2.1 per cent in February alone, the biggest drop in a single month since May 2011.
The biggest annual falls were seen in expensive parts of London traditionally favoured by highly paid workers in the financial services industry.
They are down by 7.9 per cent in Tower Hamlets and five per cent in Hammersmith & Fulham, 4.4 per cent in the City of London, 2.6 per cent in Wandsworth and 2.4 per cent in Westminster.
Property experts blamed the uncertainty caused by the result of the Brexit referendum and, at the top end of the market, higher taxes, for the reverse. The slump in London was in contrast to most of the rest of the country.
Prices across England as a whole were found to rise by 4.1 per cent to an average of £242,176 in the year to February.
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Jeremy Leaf, north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, said: “Looking at the last few housing market surveys, a clear pattern is beginning to emerge.
“We are seeing a two-tier market developing, with higher national property prices masking stagnating, or even falling prices, in London.
As a result, the old north-south divide is turning on its head with northern areas steaming ahead much faster than the rather sluggish south.”
Mike Scott, chief property analyst at fixed fee estate agent Yopa, said: “With no sign of a turnaround in the London market, we expect it to continue to be the worst-performing region for the rest of this year while prices carry on increasing in the rest of the country, albeit at a slower rate.”
Nick Leeming, chairman of agents Jackson-Stops, said London vendors and buyers had been engaged in a stand off last year but now “sellers are becoming fed up with waiting and are instead having to compromise on price to make a sale”.
