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London property's 'challenging affordability' sees it languish at bottom of global cities ranking

A 5.5 per cent drop in property prices saw London’s housing market rank 95th out of 107 major cities around the world.

Knight Frank’s Global Residential Cities Index for Q4 2023 reported that London was one of only 18 urban centres registering declining annual house prices at the end of last year.

“Like all markets, London has been challenged by sharply higher interest rates,” Liam Bailey, Global Head of Research at Knight Frank, told Homes & Property.“However London’s weaker than average performance has been affected by higher price to income multiples and challenging affordability metrics compared to many other world cities.”

Other cities notorious for the high cost of housing saw an uptick in property prices. New York, which ranked 17th, saw house prices rise 7.8 per cent year-on-year, while Vancouver (30th) registered a rise of 4.8 per cent. Hong Kong, however, saw a 7.2 per cent drop that put it in 103rd place.

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Knight Frank said that low housing stock boosted property prices across America, with house prices up more than seven per cent in Philadelphia, Los Angeles, Chicago, Miami, and Boston.The weaker markets were predominantly European.

Munich came in at 96th with a 6.6 per cent drop in house prices, Paris ranked at 99th (6.9 per cent), while Luxembourg City came dead last with a 13.6 per cent drop.

Warsaw bucked the trend, with 23.5 per cent annual growth bagging it 3rd place in the rankings.

The top two spots went to cities in Turkey, where rampant inflation has pushed up prices. House prices in Ankara almost doubled, rising an eyewatering 92.2 per cent in 12 months.

In general, Knight Frank reported, most cities saw signs of recovery after a year of falling house prices.

“Global city housing markets have seen a noteworthy resurgence, with an average price increase of 3 per cent in the 12-months to Q4 2023, a notable uptick from the 1.6 per cent in the previous quarter.

“The anticipation of lower interest rates later this year, is reflected by 67 per cent of markets seeing positive price growth in the past year.

London’s market will recover eventually too, they said. “Our view is that price growth will turn positive this year as demand outpaces relatively weak supply of properties for sale,” explained Bailey.

Nationwide has already reported that London house prices were up 1.2 per cent in March, with Savills reporting a 35 per cent uptick in transactions for the start of 2024.

Chestertons said there has only been a two per cent uplift in the number of homes coming to market in London between February and March.

“Although we are expecting more sellers to list their properties over the coming weeks, demand will still outweigh supply and buyers are facing competitive conditions with even less room for price negotiations”, said Head of Sales Matt Thompson.

The estate agents said it had seen an 11 per cent drop in the number of sellers prepared to compromise on asking prices.