Price of London first-time buyer homes drops as buy-to-let market collapses

London’s house prices are continuing to slide, with average asking prices down just over £11,000 year on year.

One and two bedroom properties have seen the largest price drops since July 2017, providing some much-needed good news for beleaguered first time buyers.

Starter-home prices have fallen 3.5 per cent (or almost £18,000) to an average £486,000, according to new research from Rightmove.

Meanwhile the price of three- to four-bedroom houses has remained relatively unchanged at just over £700,000.

Annual house price changes in London

Hover over each borough for average price in July 2018 and the percentage change over the past year plus the past month. Based on the Rightmove House Price Index for July 2018

But larger and detached homes have dropped by 2.7 per cent — although these “top of the ladder” properties still cost an average of almost £1.5m.

“Aspiring first-time buyers are among the greatest potential beneficiaries of the downwards adjustment in asking prices by London’s sellers over the last 12 months,” said Miles Shipside, Rightmove director and housing market analyst.

“It’s been well-documented that the top end of the London market has been struggling for the past couple of years, but … asking prices in the lowest priced sector are now experiencing a larger percentage fall than these high-end properties.”

Combined with Stamp Dutyrelief on properties worth less than £500,000 and Government initiatives like Help to Buy London, the news will bring relief to the 47 per cent of millennials who recently told Royal Bank of Scotland researchers they had given up hope of ever owning a home.

According to the latest analysis the number of first time buyers in the UK has fallen by almost a quarter since 1994 and the number of lone first time buyers have seen a more significant 45 per cent decrease.

The key reason for price drops in the capital’s starter home sector is a collapse in the buy to let sector.

Tax changes over the past two years have made owning a rental property a far less lucrative enterprise. The number of landlords snapping up flats in the capital has collapsed as a result, leaving the way clear for first time buyers.

Jonathan Samuels, chief executive officer of property lender Octane Capital, described the situation as a “sea change” in the property market.

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