UBS: Here’s why 2018 will be a bad year to invest in London’s housing market

London outperformed the UK consistently — until 2017

Land Registry, UBS, as of 31 October 2017

(Annual London vs UK house price growth, y/y)

Average London prices have underperformed the UK only once in the last 10 years, but growth in London was below the UK average in every month of 2017.

“London has likely underperformed due to higher prices in London, and thus lower affordability; with less benefit from government initiatives [like Help-to-Buy], and greater impact from tax changes in the past few years,” Simmons wrote.

Prices in Prime Central London — where a £1 million house counts as a bargain — have fallen the furthest, down 7.4% on average from their 2007 peak, according to data from Knight Frank, but the rate of decline appears to be slowing. The year-on-year rate of decline bottomed in January 2017 at -6.7%, and moderated at -2.2% by the end of November.

Greater London’s negative price outlook could be starting to stabilise, too. November 2017’s reading from the monthly RICS poll of surveyors marked 22 months of almost consistently negative price expectations, and more surveyors still expect a fall in London house prices than expect a rise.

But the month on month proportion seems to be shrinking: November’s reading was the lowest since the EU referendum in June 2016, while December’s reading was the lowest since at any point since April last year.