This is the fastest pace of decline since 2009 and the seventh consecutive quarter in which prices have declined in the capital.
London was the weakest performing region in Q1, with prices 3.8% lower than the same period of 2018, Nationwide’s House Price Index has found.
This is the fastest pace of decline since 2009 and the seventh consecutive quarter in which prices have declined in the capital.
Robert Gardner, Nationwide’s chief economist, said: “This trend is not entirely unexpected, however, as it follows several years of sustained outperformance which left affordability more stretched.
“Policy changes that have impacted the buy-to-let market in recent years are also likely to have exerted more of a drag in London, given that the private rental sector accounts for a larger proportion of the housing stock in the capital than elsewhere in the country.
“More widely, prices across the South of England (and to a lesser extent in the Midlands) are also well above pre-financial crisis peaks, while those in Northern England, Wales and Scotland are still close to 2007 levels.
“However, prices in Northern Ireland are still more than 35% below the all-time highs recorded in 2007.”
Andrew Montlake, director of mortgage broker,Coreco,said: “Prices in the capital may have declined at their fastest rate for a decade but after the outrageous gains of recent years and given the current chaos in Westminster it is an understandable drop.
“London is particularly sensitive to ongoing political uncertainty but it is also paying for the astronomic house price growth of five or six years ago.
“The small increase in prices, both monthly and annual, once again highlights how the lack of homes on the market, and broader supply deficit, are propping the market up at a time of great uncertainty.
“A growing number of prospective buyers are concluding that the current volatility is not a time to put off a purchase but bring it forward as they hold all the cards. In recent weeks in particular we've seen a marked pick-up in activity levels.
“While an absurd drama plays out in Westminster, many people are now getting on with their lives, buying property at strong discounts and making the most of the competitive mortgage rates still available.”
Meanwhile, England recorded its first annual price fall since 2012, with prices down 0.7% compared with Q1 2018, driven by declines in the South East of England.
Northern Ireland remained the strongest performing home nation in Q1, although annual price growth softened to 3.3%, from 5.8% last quarter.
Scotland saw a slight pickup in annual price growth to 2.4%, while Wales saw a marked slowing in growth to 0.9%, from 4.0% last quarter.
UK house price growth remained subdued in March, with prices just 0.7% higher than the same month last year.
Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, even though survey data suggests that sentiment has softened.
Measures of consumer confidence weakened around the turn of the year and surveyors report that new buyer enquiries have continued to decline, falling to their lowest level since 2008 in February.
While the number of properties coming onto the market has also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers in recent months.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “While one would expect housing market activity to spike in March as we move into the traditionally busy time of year for buying and selling a home, the fact that price growth, transactions and number of mortgages approved have managed to remain broadly stable is remarkable given the ongoing political situation.
“Once again, annual price falls in London and the south east demonstrate that the housing market is not a uniform one across the country, and some areas are struggling more than others.”
