London House Prices Fall

on Jul 18, 2012
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While during recent months London property has seen significant price increases, the traditional summer lull combined with a supply surge has led to a record cut in London house prices in July. On 16 July 2012, Bloomberg reported on the July Property Report of Rightmove Plc (RMV), a company operating a website listing properties for sale across Britain, with the report indicating a record drop in asking prices in London.

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July asking prices dropped by 3.6 percent from the previous month, to an average £460,304 for the greater London area. Values in Kensington and Chelsea, London’s most expensive districts, fell 5.1 percent in July to £2.03 million. Yet the observed downtrend in house prices is not limited to London; across England and Wales, asking prices fell by 1.7 percent, which according to the Rightmove statistics is the first fall since January. As noted in the Bloomberg article, of the ten regions tracked by Rightmove, only the West Midlands saw a monthly increase in prices in July, with average house values rising 2.3 percent relative to a year earlier.

!m[](/uploads/story/183/thumbs/pic1_inline.png)Although the summer season generally sees a decline in new sellers’ prices, Rightmove notes that this is the largest drop it has recorded in July since 2008. The company states in its report that new sellers outstripped successful property buyers by nearly 2:1, with more property coming to the market in July. The observed July increase in supply is six percent compared to the previous month and four percent, relative to July 2011.

Miles Shipside, director at Rightmove, comments that sellers, who come to the market during the summer season, are more “price sensitive” since they recognise that potential buyers are more excited about going abroad than about viewing property.
Among the other reasons cited for the reported decline in asking prices, particularly with regards to London, are the “Olympic distractions” and the “miserable viewing weather”. Bloomberg reports that according to the Met Office, the UK’s national weather service, Britain suffered the wettest June for over a century. In addition, the Met Office notes that the UK has already received more rain in the first two weeks of July than it normally gets during the whole month.

The plunge in house prices is not observed solely by Rightmove, with Bloomberg quoting Victoria Clarke, an economist at Investec Securities, who notes that the housing market is heavily depressed. “It fits in with the general backdrop of consumers and households being very nervous about the economic outlook, and if supply continues to come online, it’s possible we could see further price moves downwards,” she said in a telephone interview.
Bloomberg also quotes a new report by the Ernst & Young Item Club, indicating that house prices will fall two percent this year, leaving them eight percent below the 2008 peak in nominal terms, and down 24 percent in real terms. The group, however, forecasts a modest recovery for house prices in 2013.

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