House prices in London have dropped the most since the height of the financial crisis, underscoring the impact from rising inflation and uncertainty over the U.K.’s exit from the European Union.
The average price of a home in the capital dropped to £593,396 ($822,447) in the three months to January, down 2.6% from the same period last year, according to a report by data provider Acadata out on Monday. In comparison, house prices across all of England and Wales rose 0.7% during the period, with the biggest jump seen in the North West.
“This is the steepest annual rate of decline in London prices since August 2009, during the last housing slump, which was itself associated with the banking credit crisis of 2008/09,” Acadata said in the report.
“On the basis of housing transactions, it certainly suggests that the concept of a Northern powerhouse to rival London has already begun to emerge, and one that is being built on the back of relatively affordable housing.”
London — once the center of a U.K. property boom — has now seen house prices fall for three straight months, according to the data. The weakness comes as the country grapples with uncertainty over the Brexit negotiations with Brussels, with particular focus on how the divorce will impact the capital’s financial center and investments.
The EU referendum in 2016 also sparked a plunge in the pound , which pushed up inflation and is now eating into household’s budgets. Rising inflation also prompted the Bank of England to raise interest rates for the first time in a decade in November, driving up the cost of mortgages.
Even with the recent drop in London house prices, the capital remains an expensive place to live. In the most pricey borough — Kensington and Chelsea — a home costs an average £2.2 million ($3.05 million), while potential buyers have to fork out £300,000 ($337,812) in the cheapest area of Barking and Dagenham.
The city’s bloated prices have fueled concerns young families are forced to leave the capital and that the whole generation of so-called millennials will be priced out of the property ladder. London Mayor Sadiq Khan said in an interview with City A.M. on Monday that chief executives refer to the “housing crisis” as a primary barrier to do business in the city.
“That is why we are trying to rapidly increase the number of genuinely affordable homes in London. It is crucial, because otherwise Londoners aged between 30 and 40 are leaving London because they want to buy a property, go from a flat to a home, and what you don’t want is a brain drain,” Khan said.