House prices in the capital’s most sought-after areas continued to fall sharply in August
House prices in London’s most sought-after neighborhoods continued to fall in August, as confidence in the country’s property market weakened amid rising mortgage rates in the wake of the Iran war.
The capital’s main property market area lost value last month, with house prices in London falling by 2.2 per cent year-on-year, according to the Office for National Statistics.
In Westminster, which includes prestigious postcodes such as Belgravia, Mayfair and Maida Vale, the average house price fell by 14.3 per cent in August, to £887,000.
House prices fell by 13.8 per cent to £1.2 million in Kensington and Chelsea in the year to August, and by 10.6 per cent to £798,000 in Camden.
London’s luxury property sector has lost value in recent months, as potential vendors in this segment of the market bear the brunt of stamp duty and council tax burdens, as reported by City AM.
Rising mortgage rates, fueled by the Iran war, have begun to drag down home prices across the country, as sellers are forced to lower their asking prices in order to sell.
The average two-year fixed mortgage rate rose to 5.55 percent, from 5.29 percent in the previous month and 4.25 percent since before the Middle East conflict broke out, according to property portal Rightmove.
UK house price growth eased for the fourth consecutive month to 0.9 per cent in August, the ONS announced on Wednesday. This development coincides with mortgage approvals falling to their lowest levels since 2023, while transaction volumes have fallen in months and years.
Paige Tao, an economist at consultancy PwC, said falling consumer confidence had left the housing market in “wait and see mode” ahead of the budget.
A relaunched Help to Buy scheme will provide markets, but economists warn that Labor must use the Budget to ease concerns about rising borrowing costs.
“Fiscal credibility matters because gilt yields directly feed into the cost of mortgage finance. A Budget that unsettles the market can push the cost of loans more and delay transactions more; one that restores confidence can do the opposite,” said Tao.
Tom Bill, head of UK housing research at Knight Frank, said house price growth in the UK had “halted this year,” with falling mortgage approvals indicating less activity later this year.
He said: “The answer to the British housing market is not comfortable with overseas geopolitical risks, but the downward pressure on prices can reverse quickly if the unpredictable Middle East conflict de-escalates or ends. As affordability barriers bite, it is not a surprise to see the biggest price impact in London”.