London house prices fall as UK market undergoes most dramatic slowdown since 2009

Homes in London are better value for money, reports Zoopla, but higher mortgage rates have impacted sales
Croydon has seen the biggest drop in house prices this year, according to Zoopla
Daniel Lynch
India Block30 October 2023

London house prices have fallen this year as rising mortgages and the cost of living crisis hampers sales, according to the latest data from Zoopla.

There were price drops across all boroughs, up to as much as 3 per cent in Croydon.

Along with Croydon, the boroughs with biggest falls in house prices were Harrow, at a 2.9 per cent drop, and Waltham Forest at 2.4 per cent.

Prices were most resilient in Havering, which registered only a 0.2 per cent drop in house prices.

Inflation and the Bank of England hiking interest rates in the fall-out to last year's minibudget has exacerbated a slowdown in London house prices.

Price correction

"London housing was over-valued in 2016 as strong demand pushed prices high relative to earnings,” said Richard Donnell, executive director at Zoopla.

Brexit and the pandemic hit demand in the capital harder than the rest of the UK, he explained, hence London lagging behind other regions.

“While prices in London are falling – they aren't falling as fast as in previous periods as they have started to become better value for money,” added Donnell.

“However, this is now being tested by higher mortgage rates which hit higher-value markets like London more than others as people need higher incomes to buy with larger mortgages.”

Sudden slowdown

Prices have dropped across four out of five UK regions compared to last year

“Weaker demand and reduced buying power have resulted in a rapid cooling of house price growth from +9.2 per cent a year ago to -1.1 per cent today,” said the report.

“This is the most dramatic slowdown in price growth since 2009.”

There were one million less house sales in 2023 than there were in 2022.

The property website predicts that house prices will continue to fall by as much as 2 per cent in 2024, assuming mortgage rates drop to 4.5 per cent.

"We think London house prices will track in line with the rest of the UK, with prices tracking sideways to slightly lower over 2024 as incomes rise,” said Donnell. 

“The outlook for London is down to how London's position as a global capital evolves and the jobs created over time." 

Rise of the first-time buyer

First-time buyers have been the largest buyer group of 2023, accounting for 33 per cent of sales according to Zoopla.

Rapid rent rises – as much as 12 per cent in London – have pushed more and more people onto the property ladder despite mortgage costs.

Cash buyers have been the second biggest set of buyers, snapping up 32 per cent of properties without having to worry about mortgage rates.

While house prices are down, owner-occupiers shouldn't be too disheartened said experts.

"It's important to take a long-term view when buying a house," said Karl Knipe, director of London estate agents Kings Group.

"Very low single-digit price rises or falls make no difference when buying a home that you will live in for many years - it shouldn't be relevant," added Knipe.

"The forecasts are showing that 2024 looks like it will be a similar year to 2023, so if you want or need to move and buy your own 'castle' - now is the time to do your homework and put yourself in the best position for the new year knowledge wise, financially wise and ability wise."

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