For the first time in eight years, property prices in London went into reverse with a 0.5% dip in value, while the rest of the UK saw a minor rise.
The capital’s homes lost an average of £2,151 over the course of 2017, ending the year at £470,922 according to the latest research from Nationwide Building Society. Despite having the most expensive properties in the country, London was the weakest performing region, as the UK saw average house price growth of 2.6%.
The UK as a whole saw a contraction compared to 2016’s results, when the year-end property price rise was 4.5%.
London had not seen a fall in house prices since 2009, after the financial crisis caused values in the capital to plummet – and it had not been the worst performing UK region since 2004.
Robert Gardner, chief economist at Nationwide, said: “Low mortgage rates and healthy employment growth continued to support demand in 2017, while supply constraints provided support for house prices. However, this was offset by mounting pressure on household incomes, which exerted an increasing drag on consumer confidence as the year progressed.”
First-time buyers are still reaching for the ladder
The report addressed affordability as a key issue, as people struggle to be able to save for a deposit on a home, and the time it takes to save the required amount continues to grow. According to the figures, a 20% deposit in London is now more than £80,000 based on average first-time buyer house prices.
“It is arguably even more challenging to save for a deposit than it was a decade ago, due to falling real earnings (i.e after taking account of inflation) and lower interest rates for savers,” said Gardner.
“In most regions, it would take around eight years for the typical buyer to save for a deposit. This rises to nine years in the south-east and to nearly 10 years in London, even though the prospective typical buyer in the capital is in the top 10% of the income distribution.”
In 2018, Nationwide expects the UK to see house prices increase by only around 1% on average, while unemployment and mortgage interest rates should remain relatively low. Property prices will also continue to be supported by the shortage of housing available as there are still too few properties being built.