12th June 2014
The booming UK property market appears to be easing as the Royal Institute of Chartered Surveyors (Rics) cuts its house price growth forecasts while new instructions continue to decline.
In the organisation’s May survey while it admitted the national picture remains relatively robust, particularly with respect to price momentum, activity in the market is showing signs of moderation.
It found that although the imbalance between supply and demand still persists, it is now doing so to a lesser extent and new instructions contracted for a fifth month in succession while buyer interest dropped in London for the first time since January 2013.
Rics chief economist Simon Rubinsohn said: “New buyer enquires are now rising at the slowest pace since February 2013. Given the relationship between new buyer enquiries and new instructions on the one hand and house price inflation on the other, this signals a slowdown in the latter over the next 6-12 months.”
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%.
However house price gains are still strong across all of the UK, with the South East and East Anglia experiencing the sharpest increase for a second consecutive month. But despite the London price balance creeping up in May, it still sits well below the readings commonly reported added Rubinsohn.
He said: “Significantly, house since the middle of last year and has moved closer in line with the national average. Looking ahead, price expectations, both at the three and twelve month horizons are still pointing to material growth across the country, although to a slightly lesser degree than previously.”
The introduction of tougher lending checks for borrowers via the Financial Conduct Authority’s Mortgage Market Review at the end of April, has already appeared to have taken at least some of the heat out of the UK property market.
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.
Howard Archer, chief UK & European economist at IHS Global Insight noted that this figure was down from 66,568 in March, 69,145 in February and a 74-month high of 75,838 in January.
Archer said: “In marked contrast, mortgage approvals had previously risen for 11 successive months to January’s peak level from a low of 51,755 in February 2013. It is notable that even January’s peak level was clearly below the long-term average of 84,189 a month since 1993. This strongly suggested that the introduction of new regulations under the Mortgage Market Review (MMR) has at least temporarily taken some of the steam out of housing market activity.”
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