London house prices stabilising

Property prices in the London market have continued to stabilise following significant falls earlier in the year, according to the latest research.

The London Property Index from estate agent Haart reveals the average price of a property dropped by just 0.2 per cent during July.

This has seen average prices drop from the £248,642 recorded in June to £248,155 in July.

Haart now predicts prices could fall by a further five per cent over the remaining months of 2008, following a 14.5 per cent decline to date.

Encouragingly, first-time buyers now make up 20.5 per cent of enquiries, the highest in 11 months, as they look to capitalise on the lower prices for property presently available.

Lenders are also showing the first signs of relaxing their lending criteria, again encouraging buyers to enter the market.

"First-time buyers were faced with severe affordability constraints when property prices reached their peak last year and have been sitting on their hands since the start of the credit crunch," explained Russell Jervis, managing director of Haart.

"The reduction in prices coupled with rising rents has now caused them to show a renewed interest in entering the market, particularly in the East, south-east and south of London."



House price falls in London

Haart now predicts property prices in the capital could begin to recover in the first half of 2009.

Rental market

The London rental market remains strong, according to Haart, with average rents having increased 1.5 per cent since the start of the year.

Hackney has seen the highest increase over the seven months to July, at five per cent, as demand for rental property continues to outstrip supply.

"The rental market is still strong and is helping to underpin the housing market, as demand for rented accommodation remains high, with rents increasing again in July," concluded Mr Jervis.

"In some instances, with rents being pushed up so high, a mortgage is probably even becoming a cheaper option."

Chris O'Toole