The London housing market is beginning to calm as asking prices in the capital fell almost 6 per cent this month, according to a study by online estate agent Rightmove.
The average price of a house in London fell to £552,783, down 5.9 per cent on July – the largest monthly drop across England Wales and the biggest in six years, according to the study.
House sellers' asking prices nationwide fell steeply by 2.9 per cent month-on-month to £262,401 typically in August as the mood of the market grows calmer in London in particular.
Despite the drop, asking prices in the capital are still 10.3 per cent higher than they were a year ago. The North was the only region to see asking prices increase month-on-month, with a 0.5 per cent uplift pushing them to £149,354 typically.
Rightmove said the figures reflect sellers adopting a "summer sales attitude to pricing", in the knowledge that potential buyers tend to be thinner on the ground during the holiday season, before activity lifts again in the autumn.
Alongside these seasonal factors, Rightmove also said that recent speculation about the prospect of interest rates rising, more properties coming up for sale and toughened mortgage lending rules are likely to be having an impact on the market.
At the end of April, new rules came into force under the Mortgage Market Review (MMR) which mean lenders have to ask mortgage applicants more detailed questions to check whether they can afford their home loan.
London-based estate agent Simon Gerrard, who is president of the National Association of Estate Agents, said: "Comments from the Bank of England mean that potential buyers are concerned about the rise in interest rates and don't want to find themselves in a position where they are hamstrung by rates going up."
He said the MMR rules also mean mortgage applications are taking longer to process.
Gerrard said: "In London where prices are much higher than the national average anyway, we are beginning to see the impact of these factors."
Miles Shipside, director of Rightmove, said: "New seller asking prices are good lead indicators of the current mood of the market, and those who have put their property up for sale in the last month are obviously aware that potential buyers are thinner on the ground at this time of year and need to be tempted to act by cheaper prices.
"A drop in August is typical but it's steeper than expected this year for two reasons. Firstly, both buyers and sellers are becoming increasingly aware about personal finances, given that the cost of mortgages are going up and regulators are trying to bring availability down.”
He added: "Holidays always cause a big price reverse in the capital, but there is also a massive year-on-year jump in the number of newly-marketed properties, up 20% compared to August last year, and double the figure seen in any other region. More sellers and fewer buyers mean price falls."
Additional reporting by PA
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