16th June 2014
Following significant increases since the start of 2014, June has witnessed property costs hit a standstill with London now seeing a drop in asking prices.
According to property portal Rightmove the average rise in new seller asking prices is a mere 0.1% and while demand typically eases over the summer, this marginal increase is well below June’s 0.6% average over the past decade.
The group’s research found while all regions have seen an increase in supply on the back of more people trying to sell, especially in London, the survey suggests that the tougher borrowing criteria introduced as part of the City regulator’s Mortgage Market Review (MMR) has taken some of the momentum out of the market.
Rightmove found that estate agents are now reporting an initial ‘knee-jerk’ reaction by some lenders, turning down mortgages previously agreed in principle leading to house sales falling through. However it added that the last-minute and apparent over-zealous implementation of MMR by some lenders and current delays in the mortgage application process make it hard to assess whether it will result in a long-term downturn in buyer demand.
Miles Shipside, Rightmove director and housing market analyst said that while the legacy of rises in central London continues to ripple out to its better-value commuter-belt, fueling price increases in all southern regions, London itself is now marking time.
He adds: “It’s an example to the rest of the country of what happens when affordability and common sense get stretched too far. Through luck or judgement it appears that the timing of the Mortgage Market Review, more property for sale in all regions, and a tail-off in pent-up buyer demand are alleviating some of the upwards price pressure. This will come as a relief to the Governor of the Bank of England and the Financial Policy Committee, who have cited an over-heating housing market as a serious threat to economic recovery and have further powers to use should it get out of hand.”
The report follows the latest survey from the Royal Institute of Chartered Surveyors (Rics) which found that the booming UK property market appears to be easing as the organisation cuts its house price growth forecasts.
RICS is now projecting average annual house price inflation, at a national level of 5% over the next five years, which has edged down fractionally in recent months. In contrast, price expectations over the same time horizon in London have plummeted from a peak of just over 9% as recently as March to now just under 5%.
In addition while the latest house price monitor from Halifax reported that home prices rocketed by 3.9% month-on-month and 8.7% year-on-year in May, the strong rise came despite a slowdown in mortgage activity. Specifically, the Bank of England reported that mortgage approvals for house purchases fell for a third month running in April, and markedly, to be at a 9-month low of 62,918.
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