Home prices in London fell for the first time in two years in September as demand for properties waned, a survey conducted by Hometrack Ltd., a property intelligence firm, showed.
The survey polled several real estate agents across the country. While property values stagnated in England and Wales, prices went down only in the capital city declining 0.1 percent.
Hometrack attributes the fall in property values to the fact that buyers are now shunning away from the inflated property prices, which is in turn forcing sellers to reduce the asking cost. Demand for homes slumped by 2.1 percent in September.
"While this slowdown can be attributed partly to seasonal factors - including a slight hangover from a slow August - it's clear that agents are wary about the direction of the market as a result of weaker demand and lower sales volumes," Reuters quoted Richard Donnell, Hometrack's director of research.
"There is a distinct chill in the air this month; after a strong run over the last 18 months, the momentum of house prices rises has started to turn with growth now at a standstill for the first time since January 2013," Donnell said according to The Telegraph.
Donnell also told Bloomberg that homebuyers became cautious as word of a looming housing bubble due to sky-high prices spread. News of a possible mortgage rate hike and tightening lending standards also helped cool the market down a bit.
Donnell expects home prices to keep declining in the coming few months.
"Although the lead indicators suggest buyers will start to gain the upper hand, there are many home owners who don't need to sell and won't bother unless it's financially beneficial to do so. The net result is a likely drop-off in activity in the coming months," Donnell was quoted by Bloomberg.
Average home prices in London crossed $815,175 last month and have soared by 18.4 percent in the past one year alone. London was recently named the world's most expensive city in Savills' 12 cities report, beating last year's champion Hong Kong.
The report claimed that London's real estate costs had accelerated 10.6 percent in the first six months of 2014 alone with the annual cost per employee crossing $120,000.
The high prices could have a battering effect on the city's economy as more people move away from the area in search of cheaper residences and cost of living.
"...gentrification has priced out new start-ups, and the vitality of central London locations are at risk as they become too expensive for the types of occupiers that made them attractive in the first place," The Savills report claimed.
