London house prices hardest hit in July

London bus

Londoners are suffering the worst impact of the housing market downturn with asking prices falling by £21,000 over the past month.

The latest house price data from online estate agency Rightmove shows the house price correction gathered pace in July, with national prices 2.3% lower than the previous month. London saw the biggest impact, with asking prices being cut by over 5%.

Miles Shipside, commercial director of Rightmove, says summer sellers have been prepared to cut prices in order to shift their property.

The impact of falling house prices in the capital means that London property values are finally coming back inline with the rest of the country.

Shipside says: “Londoners have so far been largely insulated from the price falls taking place elsewhere in the country. However, sellers who choose to come to the market during the peak holiday season generally have a greater need to sell, and as a result properties coming onto the market in July were on average over £21,000 cheaper than last month.

“Every borough in London saw a month on month fall in asking prices in July, and all but six now have prices lower than a year ago.”

Although the figures may worry homeowners intending to sell in the near-future, buyers lucky enough to have secured mortgage credit are set to benefit from the weaker housing market. And even sellers forced to cut their price could offset their losses by negotiating on their new purchase.

Rightmove’s research also shows record levels of unsold properties on the market. This saturation is forcing many sellers to cut their prices, especially as the number of buyers are dried up considerably.

It is predicting historically low levels of house sales in 2008.

Shipside says: “Despite some deals being done at prices that begin to address affordability concerns, the number of transactions this year is in danger of being the lowest since 1959.”

The lack of mortgage finance is key to the fall in house prices, as this prevents new buyers from entering the market and also damages confidence among those looking to move up the ladder.

The good news is that mortgage rates have started to fall, with Halifax the latest lender to slash rates last week. But despite Halifax, several building societies and the likes of Northern Rock and Woolwich reducing the cost of mortgages, this will take some time to feed through to the housing market.

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