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London house prices drop for the first time in eight years

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London house prices are down 0.6% over the past year, according to the latest Nationwide House Price Index. This is the first time London has been the weakest region since 2005.

House prices in the rest of the country, however, remained relatively buoyant with growth stable at 2.0% in September. However, there was a marked difference between North and South, with Northern England seeing a 3.2% year-on-year increase, while in the South, prices were up 1.9%. However, the gap between prices in the North and South remains exceptionally high by historic standards, having doubled over the past decade.

The East Midlands was the strongest performing region, with prices up 5.1% year-on-year in the third quarter of the year. This is the first time since 2002 that the East Midlands has taken the top spot.

Northern Ireland saw a softening in annual growth to 2.4%, from 3.8% last quarter, while Wales saw a slight pick-up, to 2.6%. Annual price growth in Scotland was similar to the last quarter at 1.9%.

Robert Gardner, Nationwide’s chief economist, said: “Housing market activity, as measured by the number of housing transactions and mortgage approvals, has strengthened a little in recent months, though remains relatively subdued by historic standards. Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appear to be weighing on confidence. The lack of homes on the market is providing ongoing support to prices.

“House price growth rates across the UK have converged in recent quarters. Annual growth rates in the south of England have moderated towards those prevailing in the rest of the country. London has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years, albeit by a modest 0.6%.”

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