London House Prices Decline for First Time in Eight Years

(Bloomberg) -- London house prices posted their first annual decline since the financial crisis, Nationwide Building Society said.

The 0.6 percent year-on-year drop in the U.K. capital in the quarter through September was the worst performance since 2009. It was the weakest region in the country for the first time in more than a decade.

Uncertainty surrounding the decision to leave the European Union has dealt a blow to the London housing market, though a general shortage of housing has generally helped prices maintain slow increases. The Bank of England's signals that interest rates may rise in coming months could also have an impact on price gains later this year.

“London has seen a particularly marked slowdown,” said Robert Gardner, Nationwide's chief economist. “Providing the economy does not weaken further, the impact of a small rise in interest rates on U.K. households is likely to be modest.”

In the month of September, average prices in the country slowed to a 2 percent annual gain and increased 0.2 percent from August. The pace of yearly price gains was more than 5 percent a year ago.

Still, there are nascent signs that economic confidence is starting to return after a slowdown in the first half. GfK's indicator of consumer confidence picked up one point this month, and Lloyds Bank's measure of business confidence rose from the lowest level in a year. That bodes well for consumer spending, which has slowed as the pound's drop following the Brexit referendum fuels faster inflation.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

To contact the editor responsible for this story: Paul Gordon at pgordon6@bloomberg.net.