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House Prices Have Finally Started To Fall After Two Years

Date Added 26/09/2014

Article courtesy of The Telegraph

House prices have fallen in London for the first time in nearly two years after a period of frenetic hikes in value, as demand in the capital finally dissipates.

"Modest` price drops in the London market are to be expected to follow this month`s 0.1pc decline, according to the latest Hometrack report, as buyers reject inflated prices and force vendors to slash their expectations.

London suffered the most pronounced slowdown but overall the UK house prices stalled, recording zero growth for the first time in 19 months.

The combination of over-inflated prices, slow wage growth, stricter mortgage lending conditions and anxiety ahead of interest rate rises has put the brakes on the London market and stalled the housing market recovery across the majority of the country.
The only regions that enjoyed a slight uptick were Yorkshire and Humberside, the South East and the North East. The national survey by Hometrack found that values in all other areas were flat.

Demand for homes nationally fell by 2.1pc in September and the number of buyers registering with agents every month this quarter.

September normally marks a seasonal uptick in activity but the time it took to sell as home in the UK remained static from August.

`There is a distinct chill in the air this month; after a strong run over the last 18 months, the momentum of house prices rises has started to turn with growth now at a standstill for the first time since January 2013,` said Richard Donnell, director of research at Hometrack.

This correction, particularly in the London market, will help allay fears that prices in the capital would continue to rise uncontrollably, making the dream of homeownership unobtainable for many.

The average house price in Greater London breached the £500,000 ceiling last month, automatically imposing a 4pc stamp duty tax on families and workers across the region.

Hometrack`s new data came as a YouGov poll revealed that half of all Londoners polled believed they would flee the city if housing costs continued to climb

The study, conducted by the leading market research company for London First, a not-for-profit business lobby, warned that the capital faces a chronic housing supply crisis that could drive people away.

The majority of employees surveyed, 56pc, find it difficult to pay rent or mortgages costs and work in London.

For employees, £70,000 was the magic number to living comfortably in the city. The survey revealed that those earning over that amount found it easy to service mortgages and rents.

However, two out of five businesses surveyed said they are already concerned about the impact that London`s housing supply and costs are having on their ability to recruit and retain staff, while three quarters warned that a lack of supply and costs are a `significant risk to the capital`s economic growth.`

`London is a magnet for talent, no matter people`s background and means, is what keeps it ahead of the game,` said Baroness Jo Valentine, chief executive of London First.

`Our research lays bare the economic dangers of the housing crisis, particularly in terms of losing crucial skills of those aged 25-39, who find it the most difficult to live and work in the city.`
London should be a city for everyone with talent, not just those who can afford sky-high rent or mortgage costs, she continued.

Concerned that this dip in London`s price trajectory is temporary, she said: `We could be storing up major problems for the capital if we don`t address this. There will come a time when people will not keep travelling across counties and continents to make London the vibrant world city it is if they can only afford to live in a box or have to travel hours to get to work.`

Both these reports follow research from the property group, Savills, which came out earlier this week, and found that London had overtaken Hong Kong as the world`s most expensive cities for companies to settle in and locate employees.
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