House price inflation is now slowing rapidly across London, with year-on-year falls of up to 5 per cent in the most expensive markets.
Analysis released by Hometrack revealed prices in the lowest price band are growing by as much as 8.2 per cent year-on-year, while those in the top two brackets are declining by 0.3 per cent and 5.1 per cent respectively.
Homes in the capital have risen in value by 80 per cent across all house price bands over the last eight years, but the new report stated that growth is heading towards the low single digits by the end of 2017.
The analysis also showed that since 2009 house price growth in lower value market has outpaced the market in prime areas of central London.
Markets such as Walthamstow (133.2 per cent), Clapton (133.1 per cent), Peckham (129.9 per cent) and Leyton (128.4 per cent) have grown faster than traditional prime London markets like Hampstead (86.9 per cent), Fulham (87.5 per cent), Mayfair (88.3 per cent) and Islington (89.4 per cent).
Markets with the highest 30 per cent of house prices witnessed the fastest growth in the early phase of the post-crash recovery (pre-2012), as equity-rich overseas buyers and wealthy domestic buyers bid up the cost of residential homes in high value central areas of London.
But in the three years following 2012 prices took off in the lowest value markets – including areas such as Walthamstow, Clapton and Peckham – which registered growth of 64 per cent against just 22 per cent in the upper price bracket.
Richard Donnell, insight director at Hometrack, said: “House price growth is now slowing rapidly across London.
"The annual rate of growth is currently 8 per cent year-on-year in the lowest value markets, while prices are falling by 5 per cent year-on-year in the most expensive markets.
“With a record high price to earnings ratio in London of over 14 times stretched affordability levels are impacting demand and reducing the upward pressure on prices. This has been exacerbated by tax changes that have dampened investor demand.”
In 2014, stamp duty hikes on more expensive properties hit the higher end of the London market, with a 3 per cent rise in the tax following for second home purchases in 2016.
Mike Richards, director at London-based Mortgage Concepts Associates, said: “I do think the government has gone too far with the changes to stamp duty. My own view is that it is wrong across the board.
“If it has got to stay, it should be amended so if you are selling your previous home to buy a new main residential property and it is confirmed by your solicitor, you should not be stuck with 3 per cent stamp duty.
"Many of the high-end London investors are not going to pay that stamp duty.”
simon.allin@ft.com
