London House Prices Seen Falling as BOE Acts to Curb RisksScott Hamilton
London house price rose at their slowest pace in 15 months in June and values are expected to fall as Bank of England attempts to cool the property market deter buyers, the Royal Institution of Chartered Surveyors said.
A gauge of home prices in the capital dropped to 31, the lowest since March 2013, from 50 in May, RICS said in a statement in London today, citing a poll of property surveyors. A measure of price expectations for the next quarter fell to minus 10 from 24. That indicates more respondents see declines than increases and is the weakest reading since May 2012.
London has led the surge in British house prices in the past year, prompting BOE financial-stability officials to announce measures last month to limit riskier mortgages and prevent an unsustainable buildup of consumer debt. That and tougher affordability tests introduced in April are slowing activity, RICS said.
“Rhetoric from key officials at the bank, including Mark Carney, alongside the consequences of the introduction of the Mortgage Market Review are already slowing momentum, particularly in London,” said Simon Rubinsohn, chief economist at RICS. “Buyer enquiries in the capital are now slipping back, which suggests that the very sharp upward move in prices will flatten over the coming months.”
Improving economic growth and record-low borrowing costs are driving demand for homes, with cash-rich foreign buyers intensifying the pressure in London. Home prices in the capital jumped 26 percent in June from a year earlier, the most in 27 years, Nationwide Building Society said last week.
Today’s RICS survey showed that surveyors expect house prices in London to increase in the next 12 months, RICS said.
An index of national house prices slipped to 53 in June, a four-month low, from a revised 56 in May, RICS said. The number of properties put up for sale increased for the first time in six months and demand eased.
The figures add to evidence that the property market is cooling. Home-loan approvals fell to their lowest in almost a year in May, according to Bank of England data, and mortgage lender Halifax said prices fell in June.