London "to lead price dip this year"

A new forecast suggests house prices across the country will dip 0.6 per cent in 2015, with London likely to suffer harder than elsewhere with drops of up to 3.0 per cent.

CEBR, the Centre for Economic and Business Research, says that for the first time since 2010, house price growth in the UK will be stronger when London is excluded.

Leading indicators such as fewer new buyer enquiries and properties taking longer to sell already point to falling prices in the capital, it says.

CEBR says London price falls reflect a market adjustment following a period of very strong growth, but are also a result of a series of domestic and global developments.

Foreign demand for property is expected to decline as London property prices are now above their pre-crisis peaks in US dollar and euro terms. Also, concerns over the mansion tax are partially tarnishing the country's safe haven status.

Finally, slowing economic growth abroad, most notably in Russia, is likely to limit foreign purchases of prime London properties. An increase in housing supply is further expected to place downward pressure on prices in the medium term.

Much of the UK is expected to witness higher transaction numbers as a result of changes to the stamp duty system.

Finally, CEBR says the anticipated interest rate rises from the Bank of England towards the end of 2015 will also play a role. Although rises are expected to be very gradual, with rates remaining well below their pre-financial crisis levels, buyers are still likely to react by postponing purchases.

This too will put downward pressure on house prices.

CEBR economist Nina Skero says the new stamp duty system lowers tax payments for 98 per cent of home buyers and will give a slight boost to the market, but not enough to prevent a price drop.