London house prices post first annual fall since 2009

House prices in London have seen the first annual fall since immediately after the financial crisis, according to government figures which showed gains in every other region across the country.

In the latest sign that the property market in the capital is slowing down, figures from the Office for National Statistics show the average price of a home in London fell by almost £5,000 over the 12 months to February.

While prices rose in some areas and suburbs of the capital, the central borough of Tower Hamlets, skirting the eastern edges of the City of London and encompassing the financial district of Canary Wharf, saw the steepest falls – with average prices down by almost 8%. The average price of a home for the capital as a whole was £471,986, down from a peak of £488,247 in July last year.

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For the country as a whole, the growth rate slowed to 4.4% in the year to February, having risen at an annual rate of 4.7% a month earlier. While prices dropped in London by 1%, the strongest gains were for the Midlands, where property values rose by more than 6% in both the east and west of the region.

The shifting fortunes for the British property market underscore the impact of Brexit uncertainty and increases in stamp duty, which have cut the number of average sales – particularly for pricier homes in the capital.

Liam Bailey, the head of research at estate agents Knight Frank, said increasing stamp duty costs in recent years had made buying a property “fundamentally much more expensive than it was a decade ago”.

While he said the market was nowhere near as bad as 2009, and there was some uncertainty triggered by Brexit, he added: “[Stamp duty has meant] transaction volumes are lower as people are buying and staying put for longer.”

Although house prices in London remain out of reach for many on average salaries, homes elsewhere across the country remain more affordable. The lowest average price continued to be in the north-east, standing at £128,000. The average national house price was £225,000, an increase of £9,000 from February a year ago.

According to figures from the Bank of England, the number of mortgage approvals in February fell to 63,910, sliding below the six-month average, suggesting there could be more weaker activity to come in the housing market.

There could also be greater pressure should the Bank raise interest rates next month. Caroline Simmons, the deputy head of the investment office at UBS Wealth Management, said: “A hike could act as a slight drag on mortgage approval figures, and would indeed add to purchasers’ caution.”