London's property market is cooling as a shift towards new ways of working during the pandemic prompts people to seek better lifestyles outside the capital.
Nationwide's House Price Index, published on Wednesday, found London was the worst performing region of the UK for house price growth in the first quarter of 2021.
Prices grew by 4.8% in London on an annual basis during the first three months of the year. That compared to growth of 8.2% in the North West, the UK's best performing region.
The slump in London comes amid reports that more and more people are seeking better lifestyles outside of the capital. A shift to remote working during the COVID-19 pandemic is likely to remain at least semi-permanent for many people, giving them more flexibility about where they live.
While price growth slowed, average prices in London remained over double the rest of the country. The average house price in London stood at £482,576 ($663,293) in March, compared to 231,644 for the UK as a whole.
House price growth nationally slowed in March, as the expected end to the Stamp Duty holiday curtailed a recent property market boom.
Nationwide said annual house price growth slowed to 5.7% in March, down from a rise of 6.9%. On a monthly and seasonally adjusted basis, prices fell slightly by 0.2%.
"Given that the wider economy and the labour market has performed better than expected in recent months, the slowdown in March probably reflects a softening of demand ahead of the original end of the stamp duty holiday before the Chancellor announced the extension in the Budget," said Robert Gardner, Nationwide's chief economist.
Chancellor Rishi Sunak last year announced a temporary Stamp Duty holiday meant to spur property activity during the pandemic in a bid to support the industry. The holiday sparked a mini boom in the UK property market, with prices surging higher.
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The policy was due to end on 31 March but Sunak announced in his budget at the start of the month that the holiday would be extended until June. The chancellor announced further support in the form of new 95% mortgages for first time buyers.
Guy Gittins, chief executive of estate agency Chestertons, said he was "anticipating a very busy spring and summer market".
"Recent signs of economic resilience and the stimulus measures announced in the Budget, including the extension of the furlough scheme and the stamp duty holiday, as well as the introduction of a mortgage guarantee scheme, suggest that housing market activity is likely to remain buoyant over the next six months," Gardener said. “The longer-term outlook remains highly uncertain."
Guy Harrington, chief executive of residential lender Glenhawk: “It is becoming evident that pent up demand and government stimulus had fuelled house price growth to unsustainable levels.
"However, with an overheated market still set to be a reality until autumn, the correction when it eventually comes is likely to be sharper and more painful because of wider economic deterioration.”
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