London house prices have fallen by less than we anticipated, and stopped falling altogether in Q3. However, the high level of house prices compared to incomes should mean that higher mortgage rates weigh particularly heavily on demand from mortgaged buyers in the capital. Cash buyers have helped to underpin demand to date, but we expect that support to wane as sentiment deteriorates. On the supply side, London has the highest share of rental homes of any region and is therefore most at risk from landlords selling lossmaking properties. As a result, we still think that house prices in London will fall by more than elsewhere, by around 12% in total.
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