House prices in London have fallen dramatically over the last year, according to SmartNewHomes…

In spite of a 9% rise in London’s new home prices at the end of last year, the average price is £18,000 lower than a year ago. Not that this price fall makes much difference, as according to the SmartNewHomes.com monthly index, the average price of a new home in London in December was £420,983. This is a 4.1% drop for the same month in 2006, but still a massively inflated price that will leave FTBs trembling in disappointment.

While other regions have also suffered marginal average price falls or stagnation, London’s average price is still 181% higher than the average first time buyer home of 150,000, (nearly three times the amount), putting this market firmly out of reach for this group.

Graph 1: Average New Home Price  

Graph 2: Average Price by region

David Bexon, Managing Director of SmartNewHomes.com said: “While there is no denying that London has outperformed any other region in December, our index shows that new homes are cheaper in London now than a year ago. This could be the deciding factor for families who may have been debating whether to stay in the capital or look to upgrade to a larger family sized home elsewhere.

“During 2008, London will remain a market with pockets of activity such as the Olympic regeneration zone as well as in key areas such as Lewisham, Brent Cross and Elephant & Castle.”