London house prices drop for first time in a year as rates bite

London house prices have fallen for the first time in a year, a further sign that growth in the property market is slowing, according to property website Rightmove.

Greater London average asking prices dropped by 0.1pc in August to £394,268 - the first negative monthly figure seen since this time last year, when prices dipped 1.5pc in a month.
Miles Shipside, commercial director of Rightmove, said: "Whilst this month's fall in London prices is slight, this is an early warning signal that even the buoyant London economy is susceptible to market forces.

"The latest evidence seems to indicate that we have now genuinely reached the limit of buyers' ability to afford higher prices in current market conditions."

Thanks to the five interest rate rises since August last year, buyers' affordability has been stretched even further, forcing sellers in some areas of the capital to reduce their expectations.
This month, estate agents took the lowest number of properties on to their books so far this year.
However, stock levels per estate agent have remained static, indicating a correspondingly low level of property coming off the market due to subdued sales.

A further sign of the slowing market is the average time a property sits on the market for before being sold - this has jumped from 80 to 85 days in the last month. Traditionally, the London market has led property prices across the country, creating a ripple affect.
Previously, asking prices across the country appeared to have peaked in July 2004, but the London 'mini boom' helped drive average national prices up by a further 23pc, an average of £45,262, over the next three years.

National house prices saw a modest rise of 0.6pc during August, up £1,473. Despite the fall in London's average asking prices, they are still 23.4pc - or £74,840 - higher than this time last year.

Areas that continue to do well include Islington, where prices rose 2.5pc in August, and Kingston-upon-Thames, which enjoyed a 1.9pc growth in average asking prices. London's worst performers included Hammersmith and Fulham, where asking prices fell 2.7pc, and Camden, which suffered a 3.9pc fall.

Mr Shipside said: "Whilst a slower market is to be expected in the summer holiday season, it shows that the balance of power has switched from seller to buyer in most parts of the country.
"This could swing even further in buyers' favour if the current credit tightening reduces lenders' ability to provide mortgage rates even without another rate rise by the Bank of England."

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