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Agency predicts 3% London price drop as affordability worry kicks in

The investment service arm of international ratings agency Moody's is warning that affordability issues are likely to lead to a slowdown in house price growth in the UK - a view echoed in the forecast for the capital’s housing market by Winkworth.

In a podcast released this week, Moody’s warns that increasing house prices - matched with growing concern over inflation, and higher costs for construction and other sectors affected by the weak pound - means that affordability is deterring many buyers.

Moody’s says this is why the private rental sector in the UK is increasing in size: the agency suggests that some 40 per cent of working people aged 30 or below now privately rent, compared to 10 per cent 50 years ago. 

"We're seeing stable construction trends and a decreased share of home ownership in the UK, both of which support house price growth. On the other hand, however, we're seeing lower levels of affordability which pose a challenge to growth" says Annabel Schaafsma, managing director of consumer surveillance for the agency in Europe, the Middle East and Africa.

The downbeat focus on UK house prices contrasts with double-digit price rises expected in the next five years in the Republic of Ireland, Germany and the Netherlands. 

Meanwhile in one of the final estate agency previews of the year ahead, Winkworth also says affordability is an issue for buyers in its core area, London.

“As the ebb and flow of Brexit negotiations continues to dominate the news, we expect market sentiment to be similar to that of this year, with prospective home movers uncertain of the economic outlook” says the company. 

“With buyer interest at an historic low, we have experienced low levels of transactions and we expect this to remain the case throughout 2018, albeit picking up modestly from this year’s levels. The announcement of no stamp duty payable on properties under £300,000 for first-time buyers...should increase buyer interest levels at the lower end of the market, thus encouraging home owners to consider moving” says the agency. 

It concludes that Greater London prices are likely to drop three per cent in 2018, although prime central areas may do better - especially if there is a positive deal on Brexit.

  • Brit Miller

    London prices are highly overvalued, there is plenty of room for big falls. Prices aren't sustainable just a huge speclative huge housing bubble based on cheap credit after the credit crunch.

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