London house prices fell by 0.2% in January, figures from the Land Registry showed on Friday, bringing the annual rate of inflation in the capital down to its lowest level in a year.
Prices are 12% higher than in January 2014, at an average of £458,283, and more than £100,000 above their previous peak during the last housing boom. However, the monthly drop contrasts markedly with rises as high as 3% recorded during 2014, and will be welcome news to would-be buyers trying to keep up with the market.
Across England and Wales, Land Registry said that prices had risen by 1.3% in January, an increase which could have been driven by the reforms to stamp duty announced in December’s autumn statement. However at an average of £179,492 prices remained below the peak of £181,101 reached in November 2007.
The biggest month-on-month increase in prices was in the north-west of of England, where prices leapt by 2.6% in January; prices increased in all other regions except London, the north-east and Yorkshire & the Humber, with the last seeing a 1.5% fall.
Annual price inflation was highest in London, followed by the east of England, where prices were up by 10.4% year-on-year, and the south-east, where they rose by 9.4%.
Separate figures from Land Registry showed that transactions fell in November, and that the sharpest decrease was at the top of the market. A total of 68,107 sales were completed during the month, 19% down on the figure for November 2013
Sales of homes costing £2m or more were down by 38%, at 160, with concerns over the introduction of a mansion tax likely to have been a big driver of the drop.
Matthew Pointon, property economist at Capital Economics, said the slowdown in London meant that growth rates between the capital and the rest of the country were now closer than they had been for around 18 moths.
“London has been hit particularly hard by tougher mortgage regulations, as well as uncertainties around a possible mansion tax,” he said.
Commenting on the overall growth figures for England and Wales, he said: “The surge in prices in January could reflect the impact of reforms to stamp duty that came into force in December, and provided a cut in tax to most people buying homes for under £1m.
“Given the lagging nature of Land Registry data, we wouldn’t want do draw any firm conclusions yet. But two of the three main indices do point to the reform acting to boost prices, as we had expected.”
Peter Rollings, chief executive of London estate agency Marsh & Parsons, said conditions in the capital had become more reasonable “allowing buyers some valuable let-up from cut-throat market conditions”.
He added: “A greater supply of properties on the market is music to the ears of London homebuyers, and this optimism is feeding into a healthy demand. A feel-good factor at the culmination of the general election should get the top tiers of the property market moving again as the uncertainty clears, and this is likely to mitigate any shortfall in the meantime.”
Below the headline figure for London, there were marked differences in growth in varying neighbourhoods. Prices fell by 1.9% in Kensington & Chelsea in January, while in Camden they rose by 1.7%. On an annual basis, the biggest growth was in the borough of Newham, where prices are 23.4% higher than in January 2014, though at £293,134 they remain considerably below the London average.
Guy Meacock of buying agency Prime Purchase, said areas such as Newham were “doing a bit of catching up”.
He added: “After five years of strong house-price growth [in London], there is plenty of uncertainty, with the forthcoming general election, possible mansion tax and an interest rate rise next year – all of these mean that the next six months is likely to be an improving market for buyers.”
Figures from the National Association of Estate Agents on Thursday showed almost three-quarters of homes sold in January went for less than the asking price.