It is ironic that house prices in the south and in London should start slowing now, as the eyes of the world fixate on the English capital and host of the Olympic Games.
According to Hometrack's house price index, which is one of the highest rated in the industry, house prices fell 0.1% in July, marking the first price drop in 7 months according to the report.
Richard Donnell, the director of research at the firm, said: "The housing markets of London and the South East – areas that have supported headline price growth since the beginning of the year – are starting to slow as demand weakens and supply rises."
The findings are in contrast with the latest Land Registry data, which said prices rose 0.9% in the year ending June. However, the Land Registry did also reveal a sharp drop in sales, including a 43% nosedive in sales of homes over £1m from 825 to 468 during the month,
Digging deeper into the Hometrack data we see that in fact, London was the only city to recorded an increase in prices in July, with a growth of 0.1%. However, the growth was much slower than in previous months, which combined with the fact that the number of postcodes in the capital recording falls increased was enough to spark the overall price decline.
Across the South East, the slide continued over the month with prices down across 35 per cent of postcodes – higher than the national average.
To say that the "Olympic effect" has failed to materialise is putting it mildly; while Hometrack recorded a 2.1% drop in new buyer registrations countrywide, it recorded a 2.4% drop in London and a 3.4% drop in the south east. To make matters worse supply increased, with a 1.4% jump in the number of new properties coming onto the market in July. Over the 3 months ending July the increase in supply is 5.2%, while demand has fallen 2.2% during this period according to Hometrack.
Mr Donnell warned that the gap between supply and demand is set to widen over the summer months, and points to further modest price falls through the summer and autumn.
"The seasonal slowdown has started earlier and developed more rapidly than in previous years," he warned.
- Tuesday 31 July 2012