London's housing market underperformed the rest of the UK for the first time in eight years as buyers increasingly found themselves stretched by affordability, according to Nationwide Building Society.
Home prices in the capital rose 3.7 per cent in 2016 from a year earlier, down from 12.2 per cent in 2015, the mortgage lender said on Thursday. Across the UK, values increased an annual 4.5 per cent, climbing 0.8 per cent in December.
"London's significant period of outperformance may be drawing to a close," said Robert Gardner, chief economist at Nationwide. "In London and the south of England, more people have found themselves priced out of the market or had to borrow a greater multiple of their income, though low interest rates have helped reduce monthly mortgage costs."
Stamp duty
Britain's vote in June to leave the European Union and an increase in stamp duty also weighed on London's market. A report by Halifax on Wednesday highlighted the city, saying adverse affordability means the capital will see a sharper slowdown in prices next year than elsewhere.
Nationwide predicts a gain of about 2 per cent across the country as record-low interest rates and a shortage of homes boost values. Even so, the outlook will “depend crucially on developments in the wider economy, around which there is a greater degree of uncertainty than usual,” Mr Gardner said.
“Like most forecasters, including the Bank of England, we expect the UK economy to slow modestly next year, which is likely to result in less robust labour-market conditions and modestly slower house-price growth,” he said.
