House prices have fallen year on year for the 16th month in a row but London continues to buck the trend by recording strong increases, official figures showed today.
Prices are likely to continue their "slow, downward grind" in the coming months, analysts said, as Land Registry figures showed a 1 per cent annual drop across England and Wales in April to reach £160,417 on average, continuing an unbroken negative trend stretching back as far as January last year.
Meanwhile, house prices in London increased by 5.1 per cent both annually and month on month to reach £360,721 and the capital city has not seen a year-on-year decline since September 2009.
The "safe haven" of London is enjoying strong interest from overseas buyers as the eurozone crisis continues. A separate report published by Hometrack yesterday found that demand from buyers registering with estate agents has outpaced the number of homes coming to the market in the capital over the last three months.
The Hometrack study also said that much of London's recent price rises have also come from the largely domestic markets of south west, south east and north London.
The latest dip across the country also follows the ending of a stamp duty concession for first-time buyers in March, which saw a last-minute rush of people trying to snap up deals before the deadline ended.
Ed Stansfield, chief property economist at Capital Economics, said: "In terms of the outlook, it is certainly possible that prime central London will continue to flatter the national average picture for some months to come, especially if wealthy overseas buyers continue to view London property as a safe haven from the uncertainty generated by the eurozone crisis.
"However, the lesson from 2008/09 is that if events in Europe were to result in a major financial market shock, then prime property prices in London would fall just as far, if not further, than other parts of the market."
He said it was unlikely there will be a sustained recovery in house prices outside London in the coming months, with the economy in recession, borrowing rules tightening and house prices appearing "unsustainably high" in relation to incomes.
Mr Stansfield said: "A continuation of the slow, downward grind in average house prices seems far more plausible."
Prices fell by 0.3 per cent across England and Wales month-on-month and outside London, the region with the biggest monthly increase was the South West, where prices rose by 2 per cent to reach £174,261.
Yorkshire and the Humber endured the greatest annual price fall, with a 5.6 per cent decrease to reach £115,783, while the West Midlands saw the biggest monthly price decrease, with a 2.7 per cent drop to reach £126,527.