Asking prices for London homes fall amid UK election jitters

[LONDON] Asking prices for London homes declined in March as affordability constraints and pre-election jitters denied the property market its usual spring boost.

Prices demanded by sellers fell 0.4 per cent following a 2.8 per cent jump in February, property website Rightmove Plc said on Monday. It was the first decline seen in March for three years and took the average London house price to 580,308 pounds (S$1.194 million). Values in England and Wales rose one per cent.

"This month fits the consistent pattern of ebbs and flows in many different localities within the overall London market, with prices still going up in some better-value boroughs and still going down in others that have overshot," Rightmove Director Miles Shipside said in the statement. "The consistent theme is of a readjusting market."

Near-record house prices and lending curbs introduced by the Bank of England last year are making it hard for first-time buyers, Rightmove said. At the top end of the property market, the prospect of a "mansion tax" if the Labour opposition wins the May 7 election and recent changes to the stamp-duty system are weighing on demand. Under the overhaul introduced in December, buyers of homes costing more than 937,500 pounds pay more tax.

Asking prices in inner-London boroughs fell 2.2 per cent in March, while outer regions of the capital rose 1.5 per cent.

The slowdown was reflected across England and Wales, with asking prices rising at half of the pace seen in February. Annual house-price growth slowed to 5.4 per cent from 6.6 per cent.

Rightmove warned, however, that demand continues to outstrip supply in many locations and buyers are putting down bigger downpayments. In addition, pressure is building in the buy-to-let sector from people who plan to use their retirement savings to purchase property when new pension freedoms come into effect next month.

"With new-build levels remaining low and only a small increase in properties coming to market compared to last month, the supply side is still a critical but missing part of the jigsaw if pent-up demand is to be satisfied," Shipside said.

All nine regions outside London showed annual asking-price gains, except the northeast. The average national price is now 281,752 pounds, up 5.4 per cent from a year earlier, Rightmove said. The average for Greater London has risen 5.5 per cent.

In the capital, the biggest monthly increase was in the north London borough of Islington, which rose 7.2 per cent. A 17.1 per cent drop in Westminster was the biggest for any London district.

BLOOMBERG