The latest figures from HM Land Registry show that house prices are still rising on average across the country. The figures show that prices rose by 10.3% on average across the year –although there was a small monthly fall of just 0.3%.
Our recent blog post looked at why this might be: Why Are Property Prices Still Rising?
Of course, an average is just that – an average. It is only part of the story. By definition, an average calculation of any set of numbers means that some of the numbers could be positive and equally some could be negative.
So in this post we will look at where in the UK average house prices are falling right now and at why this might be.
Last month, according to the latest HM Land Registry House Price Index, average house prices fell in these six locations:
* In Camden where average prices fell by 0.1% (to reach £848,175).
* In Islington where average prices fell by 0.3% (to reach £713,205).
* In Hammersmith & Fulham where average prices fell by 3.3% (to reach £737,402).
* In the City of Aberdeen where average prices fell by 4.7% (to reach £140,392).
* In the City of Westminster where average prices fell by 5.1% (to reach £934,508).
* In Kensington & Chelsea where average prices fell by 6.3% (to reach £1.349 million).
Incidentally no areas of Wales recorded a price fall.
Why might house prices be falling in these areas?
It’s no coincidence that all the areas with house price falls except one are in London. And not only that they are mostly in prime parts of London with high property prices. Indeed the greatest falls were in areas which are known for their prime property and which have some of the highest prices not only in London but in the whole UK.
Over the last few years, London property prices have generally risen ahead of the rest of the country. They were on an upswing long before the Covid-related house price boom affected the rest of the country. So it is possible that London prices rose and peaked much earlier than anywhere else. In some areas they may have reached a peak in affordability, which may partly account for the falls.
The prime areas of London are also very much ‘special’ property markets. Many buyers are wealthy overseas nationals buying a London home, or wealthy overseas investors. Their buying decisions are not based on the same criteria as domestic buyers and investors. These buyers are influenced by economic and political factors in many cases, as well as the attractiveness or otherwise of other prime markets worldwide.
Additionally the prime London markets are quite small. They mostly consist of a small number of properties selling at high prices. So just one or two sales can skew the figures. A single sale at an unusually high (or low) price can create an anomaly in the average property price. In Kensington & Chelsea, for example, there were only 127 property sales over the month in question compared to almost 54,000 in England as a whole.
Aberdeen is also something of a special case too, but for different reasons. Aberdeen is known as the oil and gas capital of Europe. The performance of the property market is quite closely related to the fortunes of the oil and gas industry. Both are historically quite volatile.
One last question to ask is whether other areas of the UK will experience similar price falls to these areas over the coming months?
Generally UK regional property price changes have tended to lag London.
Most forecasters expect average UK property prices to fall in 2023 in any case.
You can read some property price forecasts for 2023 here.
Several forecasters seem to suggest that property price falls in the region of 5% to 10% might be expected. In that case, the recent annual property price falls in some parts of London would seem to be indicating the way the wider market will move.
Of course, this brings us back to the question of averages. A 5% to 10% house price fall across the country does not mean a 5% to 10% fall in every area. In some areas there could be much higher falls. In some areas there could be no price change, or even a rise in house prices. Certainly many will be looking to see which other areas might be losers (or winners!) over the year ahead.