London house prices rise: Capital bucks the trend as the rest of the country suffers

 
Out of reach: 500,000 Londoners said they will never own a home
14 August 2012

London house prices are bucking the trend and continuing to rise as property in the rest of the country goes down, surveyors said today.

A balance of 24 per cent more surveyors reported falling rather than rising prices last month, the most negative reading since June 2011, the Royal Institution of Chartered Surveyors (RICS) said.

But London, which has had strong interest from overseas buyers, is the only region where more surveyors reported price rises than falls.

The West and East Midlands and Yorkshire and Humberside were the areas where surveyors were the most likely to report prices falling.

The start of the school holidays meant activity in the market tailed off further, with the number of new sellers coming to market declining for the third month in a row, while demand from buyers remained broadly flat despite the wet weather, the study said.

Official figures showed today that London house prices rose overall by 6.5 per cent last year

The surge in the capital drove an England-wide increase of 2.3 per cent for the year to June, according to the Office for National Statistics.

But analysts predicted that house prices could edge downwards into next year amid the uncertain economy and “fragile” consumer confidence.

The only region in England to see a year-on-year fall in house prices was the North-East, where they dropped by 1.3 per cent. The figures were released on the same day that the Royal Institution of Chartered Surveyors said it expected to see further house price falls over the coming months.

Howard Archer, of IHS Global Insight, said: “We continue to suspect that house prices are headed lower over the rest of 2012 and very possibly beyond.”

RICS said it had found marked regional differences however, with the North and North West regions seeing demand from buyers generally rising over the last four months in a row, while demand has either been unchanged or dropped off elsewhere.

Some 15.1 sales per surveyor were recorded over a three-month period, the lowest figure seen since October last year.

RICS said that the the difficulties many buyers are having in getting a mortgage has contributed to the drop in transactions.

Sales are expected to pick up slightly in the next few months, but both prices and sales figures are likely to show a deterioration in the next year, the study found.

Peter Bolton King, RICS global residential director, said: "Despite the terrible weather seen in many parts of the county last month, a steady number of potential buyers still got out there to test the market.

"However, this didn't result in a higher level of actual transactions. Fewer sellers are putting their homes up for sale and the ongoing problem of accessing affordable finance is not helping.

"If vendors want to sell their homes quickly, they will have to be realistic in their price expectations."

Lenders have been tightening their borrowing criteria in recent months amid the weak economy and Bank of England figures recently showed that mortgage approvals dropped to an 18-month low in June.

Competition has recently increased among lenders who have cut rates to attract buyers with larger amounts of equity, but borrowers with smaller deposits are expected to have a particularly tough time finding a deal in the coming months.

The figures refer to England and Wales only.

Scotland and Northern Ireland continued to see a general deterioration in house values in July, the report said.

Data for Scotland and Northern Ireland is collected but does not feed into the national data.

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