London’s housing market has ground to a halt.
After years of blockbuster growth, House prices The course has reversed and further declines are expected next year. The number of sales has declined, and more homeowners are pulling properties from the market.
The gloomy outlook comes courtesy of the Royal Institution of Chartered Surveyors (RICS), which warned in a report on Thursday that the UK house price indicator has fallen to a five-year low due to weakness in London.
Many factors have influenced the London market.
The government has increased in recent years tax on property purchase, making it more expensive to buy luxury residences, second homes and investment properties. Doing so has scared off some wealthy investors and caused prices in central London to fall.
Britain’s decision to leave the European Union has also hurt the market, with potential buyers putting their plans on hold due to economic uncertainty.
One property professional surveyed by RICS said Brexit and tax changes had “drained the liquidity of the London market.”
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The Bank of England is also expected to hold gradually increasing interest rates As the economy continues to grow, mortgage loans have become even less affordable for Londoners.
According to the UK Land Registry, the average house price in London is £486,000 ($690,000).
This is too much for many first-time buyers, whose financial situation has been hit by high inflation and small salary increases. But sellers will pull properties from the market rather than accept lower bids.
“Buyers and sellers are currently at a standoff,” said Hansen Lu of Capital Economics.
Simon Rubinsohn, chief economist at RICS, said the recession in London “has the potential to ripple through the wider economy, contributing to the softening trend in household spending.”
He said the dynamics could ultimately influence the Bank of England’s thinking about future interest rate hikes.
Nevertheless, analysts do not expect house prices to fall in London. Inflation has declined in recent months, Employment remains strong And the British economy is growing.
Lu said this should be considered “good news” for the stable market.
CNNMoney (London) First Published April 12, 2018: 8:11am ET
