London house prices are gradually becoming less insane

Waiting for buyers.
Waiting for buyers.
Image: Reuters/Toby Melville
We may earn a commission from links on this page.

House hunters in London’s overheated property market take any good news they can get, however small.

While the average home in London costs £472,000 ($612,000), the rate of price growth slowed to 12.6% in June from a year earlier, compared with a 13.4% pace in May. (Again, it’s the little things.)

For the second month running, London wasn’t the region with the fastest-growing property market—homes in the East of England appreciated faster. London has been the fastest-growing region in only six of the past 12 months, following an unbeaten 36-month stretch when prices in the capital rose faster than anywhere else in the country.

The gap in growth rates between London and the average for the UK has been narrowing recently, and is predicted to shrink a good deal more.

The June referendum on leaving the European Union could bring London house prices down from their stratospheric heights. Already, estate agents have said that uncertainty about how the UK’s divorce from the EU will play out has put a dent in the London market. The capital’s housing market is buoyed by wealthy foreign investors, bankers, and others who aren’t as active elsewhere in the UK. Plus, nowhere near enough houses have been built in London to meet the demands of the city’s growing population.

The average home in London still costs more than twice the UK national average, although this ratio is down slightly—ever so slightly—from an all-time high.

Even the gloomiest post-Brexit scenarios don’t expect this ratio to shrink very rapidly, which is encouraging for homeowners worried about the value of their properties and dispiriting for the first-time buyers in the capital facing prices that are 10 times their average annual earnings.