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London price drops stabilising

The London housing market is riding out the financial turmoil for now...

The latest data from haart Estate Agents reveals that, having fallen by almost 15 per cent already this year, London house price drops are now stabilising, decreasing by only 0.10 per cent in September, taking the average price to £247,271 down from £247,524 in August.

Despite the collapse of Lehman Brothers and Bradford & Bingley and the failure of Congress to agree on a £390 billion rescue package for US banks, September saw a boost in activity, with competition in the mortgage markets and more affordable prices resulting in an increase in registered buyers.

However, haart warns that renewed confidence will plummet if the Government and Bank of England do not act quickly to address the latest financial calamities.

House prices in the capital experienced some respite in September, decreasing by only 0.10 per cent to £247,271.

Prices have fallen 15 per cent since January 2008 and may now have reached the bottom of the market. September prices were buoyed by an increase in registered buyers as a result of improved levels of affordability and mortgage products becoming more competitive.

Russell Jervis, Managing Director of haart, said, "September started to show the first encouraging signs of green shoots, with a surge of buyers registering in order to advantage of the more affordable prices and more attractive mortgage deals that lenders were offering.

"Despite the collapse of Lehman Brothers and Bradford & Bingley, the level of registered buyers in London actually jumped seven per cent the following week.

"The lower end of the market has felt less of the knock on effects brought about by the recent financial turmoil and in some areas, asking prices were met or even exceeded.

"However, the economic backdrop is a cause for concern and could set the market back if the problems are not resolved quickly and consumer confidence boosted. The merger of HBOS with Lloyds TSB renewed the fear of a lack of competition in the mortgage markets and mortgage rates were increased, ending the most prolonged period of falling rates since the start of the credit crunch.

"The lower house prices are increasing buyers appetite to re-enter the market for now. However, this positive trend could easily be reversed in this volatile climate.

"To stave off a serious downturn, the Bank of England needs to cut rates and the Government must act urgently to shore up the financial markets and encourage more attractive rates and competition in the mortgage markets," added Mr Jervis.

Levels of first time buyer enquiries increased by over half a percent in September, reaching 21.6 per cent as a combination of lower prices and the stamp duty incentive enticed them back into the market.

Russell Jervis adds, "Although the majority of Londoners simply aren't able to benefit from the temporary freeze on stamp duty for properties below £175,000, instated on 3rd September, there are definitely still some bargains to be found for those prepared to look further afield. East Ham and Plaistow in East London are excellent examples, with one and, in some cases, two bed properties on the market for just below the new stamp duty threshold.

"First time buyers have been quick to snap up these homes, taking advantage of the tax break and lower prices while the opportunity is there. This month, we have seen a greater percentage of first time buyer enquiries translated into sales. Lenders still need to relax their criteria further if we are to see a proper return of this vital group," he added.

Source: haart Estate Agents