House prices in England fall for first time in seven years

House prices in England fell for the first time in seven years in the first quarter as London prices dropped at the fastest pace since the aftermath of the financial crisis.

The average selling price fell in England dropped 0.7% to £255,683 in the first three months of 2019 as London prices fell 3.8% - the steepest drop since 2009 when the UK was in recession. Prices in the outer London suburbs fell 2% and in the rest of the South East they declined 1.1%, according to Nationwide.

London prices have been falling for almost two years but rising values in other regions had kept prices rising overall in England. Prices rose in all English regions outside the South East in the first quarter but a deepening decline in London – from 0.8% the previous quarter – sent the overall picture for England into decline for the first time since 2012.

Nationwide said prices fell as consumer confidence dipped early in 2019 – a trend attributed in part to uncertainty over Brexit. In February new buyer enquiries for properties fell to the lowest since 2008. High prices and changes to taxation of rented properties also played a part in London, Nationwide said.

Robert Gardner, Nationwide’s chief economist, said: “London was the weakest performing region , with the fastest pace of decline since 2009 and the seventh consecutive quarter in which prices have declined in the capital. This trend is not entirely unexpected, however, as it follows several years of sustained outperformance which left affordability more stretched.”

Prices for all the UK rose 0.4% in the quarter to an average £213,102 as growth slowed from 1.3% the previous quarter.

The strongest rises were in Northern Ireland where prices increased 3.3% though growth slowed from 5.8% the previous quarter. The West and East Midlands and the North West recorded rises of 2.5% or more.

FORECASTS FOR 2019

With prices at the national level still edging up, economist Samuel Tombs at Pantheon Macroeconomics pointed to recent data showing a steady level of mortgage approvals so far this year, "indicating that demand has proven quite resilient in the face of Brexit uncertainty so far, though we still expect the recent weakness of several surveys to be mirrored in the lending data over the coming months".

While a brief period in the spring of modestly falling house prices "should not be ruled out", Tombs predicted house prices will recover to about 2% year-on-year by the end of this year as a tight labour market suggests 3% growth in wages is sustainable and mortgage rates are likely to rise only gradually if and when the Bank of England decides to hike.

However, with the eminent possibility of Brexit uncertainty extending further into the year, Howard Archer, chief economic advisor to the EY ITEM Club, said house prices would stagnate over 2019 or fall slightly due to persistent uncertainty.

"If the UK leaves the EU without a 'deal' during the second quarter, house prices could fall by around 5% in 2019 amid heightened uncertainty and weakened economic activity."

At Capital Economics, the prediction was that prices in London will continue to fall in 2019, while price gains across the UK "will struggle to gather any upward momentum".