House prices fall in London – but rents soar 20% in revenue boost for Foxtons

Demand for rented homes will continue to outstrip supply in overheated capital

Annual house price growth stood at 2.1% in February for the third month in a row, according to Halifax (PA)

Average house prices in London have fallen by 0.9 per cent over the past year, Halifax said – but agents Foxtons said a squeeze in demand has sent rents soaring by 20 per cent.

Across the UK, property values increased by 1.1 per cent month on month in February, accelerating from 0.2 per cent growth in January, Halifax said. The average UK house price in February was £285,476.

Northern Ireland, West Midlands and Yorkshire and Humber saw the largest annual percentage rises.

Kim Kinnaird, director, Halifax Mortgages, said: “In cash terms, house prices are down around £8,500 (2.9 per cent) on the August 2022 peak but remain almost £9,000 above the average prices seen at the start of 2022 and are still above pre-pandemic levels, meaning most sellers will retain price gains made during the pandemic.

“With average house prices remaining high, housing affordability will continue to feel challenging for many buyers.”

London-focused property firm Foxtons cautioned over a more challenging year ahead as higher interest rates are set to rein in housing sales.

It said it started the year with fewer homes under offer than the previous year, due to volatility in the housing market caused by Liz Truss’s autumn mini-Budget.

Because it takes four months to complete a house sale on average, the effects of reduced buyer activity will be felt throughout the year, the company said.

Average rental prices surged by a fifth over the year and Foxtons said its average revenue per letting increased by a quarter, to £4,211 from £3,365.

Guy Gittins, Foxtons’ chief executive, said: “The overall outlook for 2023 is expected to be more challenging than 2022, due to the highly uncertain macroeconomic backdrop, including significantly higher interest rates and inflation levels than in prior years impacting the sales market.

“Lettings is expected to remain resilient, with demand for rental properties expected to continue to outstrip supply over the near term, with rental price growth likely to normalise over the course of 2023.”

Nathan Emerson, chief executive of the estate agents’ body Propertymark, said: “Year on year, estate agents across the UK have seen a small drop in the number of sales being agreed whilst the number of new properties coming to market has remained the same.

“Increases to interest rates have caused buyers to rethink their budget and haggle on price, but the drive evidently still remains to see their purchase through and move home.”

Tom Bill, head of UK residential research at the estate agent Knight Frank, said: “The UK housing market appears near the end of a long hangover from the mini-Budget rather than on the verge of a price plunge.

“Activity stopped well before Christmas due to the mortgage market turmoil but has picked up this year as people come to terms with where rates are settling.”

Marie Johnstone, managing director at Edinburgh-based estate agents Wilson Property Group, said: “February was a far busier month than January.”