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Homeowners in London have knocked £23,500 off property asking prices as soaring interest rates hit the capital harder than anywhere else in the country.
Since asking prices in London peaked in May, sellers have reduced their advertised prices by 3.4pc, the largest drop of any region, according to data from Rightmove.
The average home in the capital in August was advertised for sale with a price tag of £672,961, down from £696,477 three months earlier, Rightmove said.
Mortgage rates have roughly tripled since the Bank of England began raising rates at the end of 2021. The average rate for a two-year fixed-rate loan has soared from 2.29pc to 6.73pc, according to Moneyfacts data.
This means the monthly cost of taking out a typical £200,000 loan has jumped by £503, an increase of 57pc.
The soaring cost of debt is hitting hardest in the markets where house prices are most unaffordable and buyers are therefore most dependent on mortgage borrowing.
Marcus Dixon, of JLL property consultant, said: “London is the highest-value market and in a time when the cost of mortgages has ramped up significantly it is therefore more likely to see bigger price reductions.”
But it will be the South West that eventually records the biggest overall price drop, Mr Dixon said.
Asking prices in the South West have fallen at the second-steepest rate of any region in the country, with prices down by 3.2pc since their record high.
However, this drop was recorded over a much shorter space of time, with asking prices in the South West only having peaked in July. Advertised prices have fallen from £396,990 to £384,182, a drop of £12,808 in little more than four weeks.
Mr Dixon said: “The South West and the South East were the markets that, post-lockdown, benefited from all of that escaping from London money. Those markets maybe have a bit further to fall partly because they saw such rapid growth over that period.”
The South West, a traditional heartland for buyers purchasing holiday homes, will be particularly hard hit as buyers shelve discretionary purchases, Mr Dixon said. “Things like buying second homes seem to have really slowed down,” he said.
On average across the UK, asking prices have dropped by 2.1pc since they peaked in May, with average homes now listed for £364,985.
In the South East, the asking price on the average home at the start of August was £481,452, a drop of £14,259, or 2.9pc, compared with the June peak.
Asking prices are often considered a lead indicator for the housing market, but the numbers show that seller’s expectations are only just adjusting to a downturn that began almost a year earlier.
Data from Nationwide shows UK sale prices, based on mortgage approval data, peaked last summer and have fallen by 3.1pc year-on-year. Yet the Rightmove data showed asking prices peaked only in May this year and have so far come down by only 2.1pc.
Matt Thompson, head of sales at Chestertons estate agents in London, said: “There’s always a bit of an expectation gap. A lot of agents were pricing ahead of the market. But clearly now the market is not moving upwards anymore and interest rates are impacting people’s affordability and confidence.”
Mr Dixon added: “A seller can list a property for whatever price they want and the message hadn’t necessarily got through properly. Now, we are seeing asking prices coming down because people are realising that if they want the best chance of finding a buyer quickly they’re going to have to come in realistically priced.”
JLL has forecast a 10pc to 12pc peak-to-trough decline in house prices, with a 6pc drop this year.
Mr Dixon said: “Our previous view was that we were going to hit the bottom in terms of prices in spring 2024. That probably looks optimistic now.”