London Housing Market Remains Subdued as Prices Decline by 3.8% in Q3

The housing market in London continues to show signs of subdued growth, with house prices falling by 3.8% annually in the three months leading up to September. This marks a slight improvement from the 4.3% decline observed in the previous quarter, despite cooling inflation.

Nationwide's recent market report reveals that house prices remained stable over the past month but continued to be down by 5.3% year-on-year, with an average price of approximately £514,000.

Interestingly, London stood out as the best-performing region in the South of England, maintaining its position as the most expensive area in the UK property market. However, the South-West, encompassing regions such as Bristol and Cornwall, experienced the sharpest annual house price decline in the third quarter, with a 6.3% drop.

The report from Nationwide highlights the ongoing weakness in housing market activity, with just 45,400 mortgages approved for house purchases in August. This figure is significantly lower, by 30%, than the monthly average recorded in 2019 before the onset of the pandemic.

Robert Gardner, Chief Economist at Nationwide, commented on the situation, noting that the subdued market conditions are unsurprising given the challenges related to housing affordability. He pointed out that someone with an average income and a typical first-time buyer's home, along with a 20% deposit, would spend 38% of their take-home pay on their monthly mortgage payment. This figure is well above the long-term average of 29%, indicating the strain on affordability.

While interest rates are showing signs of decrease, prospective buyers are still grappling with affordability issues, compounded by rising living costs and stagnant wages. Gardner also highlighted that investors have adjusted their expectations for the future trajectory of the Bank Rate in recent months, reflecting a gradual easing of underlying inflation pressures and softening labor market conditions.

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Shiv Gadhvi

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