London was the worst area of the UK property market for the first time since 2004 last year

Nationwide: London was the worst area in the UK property in 2017.
Average prices fell by 0.5% in the capital, compared to growth of 2.6% nationally.
West Midlands was the fastest-growing property hotspot, with prices climbing by 5.2%.
Nationwide forecasts UK house price growth of just 1% in 2018.

LONDON — London house prices fell for the first time in eight years in 2017, according to new data from Nationwide.

The capital was the weakest performing region across the UK last year for the first time since 2004, with average house prices falling by 0.5% in London. It was the only region to record a fall in prices.

Jonathan Samuels, CEO of the property lender Octane Capital, said: "London, without doubt, has been a victim of its own success. Prices reached absurd highs and it is now paying for its irrational exuberance."

Property agents Savills reported earlier this week that it is seeing price declines of as much as 4% in residential areas of South West London such as Battersea, Clapham, Wandsworth, Fulham, and Richmond.

The best performing region for house price growth last year was the West Midlands, where prices rose by 5.2%. It is the first time since Nationwide began its survey in 1974 that the West Midlands has topped the leaderboard. Jonathan Hopper, managing director of Garrington Property Finders, said: "For the first time in nearly a decade, the North-South divide has been reversed. London’s sliding prices held back southern England as a whole and allowed price growth in the North to come out on top."

Robert Gardner, Nationwide's Chief Economist, said in a statement: "The significant disparity in house prices across the UK has been a recurring theme in recent years. In this respect, 2017 saw the beginnings of a shift, as rates of house price growth in the south of England moderated towards those prevailing in the rest of the country."

But while the geography of price growth has shifted dramatically over the last year, London remains the least affordable region in the UK for first time buyers. The average price in the capital stands at £470,922, compared to just £182,861 in the fast-growing West Midlands. Scotland and Wales are the most affordable.

A more granular analysis of house price growth published by Halifax earlier this week also found that Cheltenham in the South West of the UK was the best performing town for house price growth in 2017. Halifax said average prices grew by 13% there.

Growth of just 1% in 2018

Nationally, house price growth slowed dramatically. Annual price growth in 2017 was 2.6%, compared to 4.5% in 2016. The average house price in the UK now stands at £211,156.

Gardener said: "Low mortgage rates and healthy employment growth continued to support demand in 2017, while supply constraints provided support for house prices.

"However, this was offset by mounting pressure on household incomes, which exerted an increasing drag on consumer confidence as the year progressed."

Nationwide is forecasting national house price growth of just 1% in 2o18. Gardener said: "How the housing market performs in 2018 will be determined in large part by developments in the wider economy. Brexit developments will remain important, though these remain hard to foresee."