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London home values rise at slowest pace since 2012


Sharon R Smyth, Bloomberg

Home values in London rose at the lowest rate in five years as affordability issues and uncertainty surrounding Brexit damped demand.

House prices rose 3.3 percent in May from a year earlier, the smallest increase since March 2012, according to data compiled by property researcher Hometrack. Values had gained 13 percent in the 12 months through May 2016, the data show.

“Given the uncertainty over the Brexit negotiations and the impact on the economy, we believe that house prices will need to adjust further over the next one to three years to align with what demand is prepared to pay,” Richard Donnell, a director at Hometrack, said by email. Data provided by the researcher is used by 17 of the top 20 U.K. home-loan providers.

Prices have begun falling slightly in some markets, including Islington and Hammersmith, and the declines are concentrated in districts where prices are 600,000 pounds ($760,000) to 800,000 pounds, the researcher said. Values in the U.K. capital are still expected to increase by 2 to 3 percent in 2017, compared with 6 percent in 2016, the firm said.

Home prices in London have almost doubled since 2009 as low mortgage rates allowed buyers to borrow more and the supply of new stock failed to meet demand. The increase means that it now costs the average buyer in the city 14.2 times their annual gross salary to purchase a home, the highest rate on record and more than double the ratio for the U.K. as a whole, according to Hometrack.

The researcher defines London as the 46 boroughs in and around the U.K. capital. The average price of a home was 492,200 pounds in May.

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