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London house prices January 2018: are values really going down?

Average price for London has dropped by 2.6%

House prices in some boroughs of London have fallen by 15% over the past year, new data from YourMove suggests. But if you own property in the capital, don’t panic just yet.

Data from YourMove shows house prices in 19 boroughs have fallen over the past year, with Wandsworth recording a 14.9% loss. While it’s important to take into account average prices, they may not tell the full story.

So, if you’ve bought a property in the capital, are you about to see your investment collapse?

In this deep dive into the London property market, we explain what the latest house-price figures mean and how you can accurately value your home.

  • If you’re looking to buy a home, call Which? Mortgage Advisers on 0800 197 8461 for expert, impartial help with finding a mortgage.

London house prices down by 2.6%

London house prices are notoriously high, but there is some speculation that growth may have hit a ceiling.

The latest data from YourMove shows the average house price in London was £609,327 in January 2018, around 2.6% lower than January 2017.

Just 14 out of 33 London boroughs saw house prices rise over the past month, according to YourMove. Most other areas that experienced growth recorded increases of less than 5%, with Havering, Haringey, Hounslow, Croydon and Barking & Dagenham growing by less than 1%.

Other boroughs all saw house prices stagnate, or even reduce. The City of London, Southwark and Wandsworth all fell by more than 10%, while Barnet, Enfield, Ealing, Harrow and Islington decreased by more than 5%.

This may seem to be bad news for London homeowners, even though aspiring buyers may welcome the reprieve. But the YourMove data is just one measure of price growth.

Land Registry data from January tells a slightly different story. The latest figures show just 11 boroughs with decreases in annual price, most of which are at the top end of the market. The City of London saw the biggest decrease at 7.9%, while Camden decreased by 4%. Other areas which fell saw prices ease by less than 2%.

You can use the the map below to compare how the Land Registry and YourMove recorded house price growth in January.

Why is London house price data different?

Both sets of data are drawn from market activity, so why are the results so different?

The government data shows sales data on residential housing transactions recorded by HM Land Registry. It excludes sales that were not for full market value, made as a gift or ‘discounted’, for example through Right to Buy.

As an average, it uses the ‘geometric mean’ – meaning that abnormally high or low sales are excluded. It also takes into account the previous three months, rather than just the month in question.

The YourMove house price index – provided by Acadata – also uses sales transactions from the Land Registry, but uses the ‘arithmetic average’. This means that all sales in the month are taken into account, including outlier results. The figures also take into account January only, rather than months prior.

Which one should you pay attention to? Both can give you insight into the local market.

The Land Registry index removes some of the volatility from the data, as only ‘typical’ sales are taken into account. For a longer-term view of trends, this can give you a good indicator of how the market has changed over time.

By contrast, the YourMove index shows you what’s happened in the most recent month, and includes the extreme ends of the market, which can be helpful as a snapshot of current activity.

Are London house prices really falling?

Taking both indices together, it seems that prices in London may not be growing at the rates we’ve previously seen over the past decade.

The ONS data puts growth for London at 2.15% for January. Very expensive areas may be hit particularly hard, the ONS data shows, with the biggest decreases mostly in areas with an average price above £700,000.

But while the rate of growth has fluctuated wildly over the past 10 years, average prices have continued to creep higher. So while a short-term decrease may be unsettling, a longer-term view shows prices have been nudging upwards since the financial crisis of 2008.

Of course, there’s no guarantee that any property will grow in value, and homeowners should consider the possibility of their property value stagnating, or even decreasing, before they jump in and buy.

Is my home going down in value?

Market averages can give you a good idea of general trends in your local market, but a decrease in the average house price doesn’t necessarily mean that the value of your home is going down.

The type of housing stock that’s being sold can affect the average price. So, for example, if a high number of flats go on sale in an area that is primarily houses, the average price may decrease, even though houses are selling at the same price.

Similarly, there might be a surge in demand for very expensive – or very cheap homes – which can affect the average. Low activity could also be a factor; if there are fewer sales in an area, the data may be less reflective of general trends.

Your house may also have features that make it particularly desirable to buyers, despite what’s happening in the market. If it’s close to an especially good school, or near public transport or has other unique selling points, your own property might stay in demand even if the market has weakened.

How do I know what my house is worth?

For an accurate valuation of your home, you need to look at local prices street by street, rather than at borough level.

To value your home, you can take the following steps:

  • Ask an estate agent for a quote. You can normally get a quote for free from estate agents, who will consider how your house compares to the local market. Be aware that estate agents may try to push up the price to win your business, so approach multiple agents for a valuation.
  • Compare recent sales from your street or block. You can refer to sales data from the Land Registry to see how much houses in your neighbourhood have sold for. But make sure you’re comparing apples to apples by looking at homes with similar features and positioning.
  • Look at property listings for local estate agents. This can give you an idea of what other owners in the area are aiming for, but keep in mind that the listing price isn’t necessarily achievable.
  • Take into account changes in your local area. Has one of the local schools recently rated well on an Ofsted inspection? Are new facilities being built nearby? Has the crime rate decreased or increased in the years you’ve lived in the area? All of these factors can affect the value of your home, so it’s worth thinking about how the local area is changing.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

Categories: Money, Mortgages & property

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