The pace of U.K. house price growth slipped again in September, according to the latest figures from Halifax, but many in the industry are predicting a surge in foreign buyers as sterling continues to sink lower.
Price growth in the country fell to 5.8 percent last month from 6.9 percent in August,on the three month seasonally-adjusted average basis used by U.K. lender Halifax as its key data point. This compares to a 9.0 percent average for this metric over the preceding 12 months.
Although Halifax does not publish a breakdown of regional growth rates, Martin Ellis, Halifax housing economist,shared some thoughts on the U.K. capital with CNBC via email, saying: "The London market is cooling following a prolonged period of strong house price growth. The rapid rise in property values has resulted in increasing challenges for those looking to buy a home in the capital."
"This is constraining demand, which is reducing price growth and activity levels. We expect to see a lengthy period of relatively modest house price rises in London, allowing incomes to stabilize and help improve affordability in the capital," he added.
Meanwhile, data released by building society Nationwide last Friday indicated a sharp pullback in growth rates for house prices in London.
Having sat atop the list of fastest growing regions for almost all of the past five years until this March, the U.K.'s capital is now only the fourth fastest growing region and saw its annual growth rate slide to 7.1 percent from 9.9 percent in the second quarter.
Dollar bills
Should sterling's sharp fall on Friday morning persist, it could impact the trajectory of the prime central London housing market given the large influence of foreign owners in this high-end area.
Research issued by data provider LonRes indicated that as of August, when sterling could buy $1.31, average values paid per square foot in U.S. dollars for prime central London properties were around 29 percent cheaper than at the market's peak in the summer of 2014. This combination of price falls and dollar appreciation has therefore made a purchase more affordable than at any time since 2012.
For euro buyers, average prices on that date were 26 percent more affordable than in July 2015.
Looking ahead, LonRes estimates that if sterling swoons to 1.15 against the greenback, dollar buyers could potentially snap up a prime central London property for a whopping 37 percent less than what was paid in mid-2014. That estimate even assumes no further price falls – an optimistic assumption in what has been a downward trending market for the past two years
Transaction stagnation
But for every buyer there is a seller and while the current environment may offer compelling opportunities to purchasers, dollar-based owners who are already holding property are likely to be rationally averse to crystallizing a significant loss on property.
Hence, the situation persists where the market remains keenly characterized by a dearth of transactions which are recording a lower number than at any time before the financial crisis.
A series of levy increases on house purchases since 2014 have made the process of buying and selling significantly more expensive, particularly at thetop end of the market. And with uncertainty about the U.K.'s impending exit from the EU, they are both contributing to the stagnation.
According to Jefferies,using official data from the U.K.'s customs office,the rate of house price sales in the U.K. overall is currently tracking 16 percent below the long run average.