House price growth stalls to lowest level for 19 months with property values in London falling for the first time
01-17-2015
- Big variations across the UK as some areas are still recording increases
- London house prices are the main contributor to slower rates of growth
- Weakest pace of house price growth recorded by Rics since May 2013
By Ben Salisbury For This Is Money
The pace of house price growth fell to its weakest level in more than a year and-a-half in December with values in London falling for the first time since 2009, according to the latest national property report.
Property experts reported huge variations across the country, with Northern Ireland, Scotland and the North West of England seeing the strongest growth in property values, while London was the only region where prices were seen falling more than rising.
But the Royal Institution of Chartered Surveyors said that with so little choice of homes on the market for house hunters in the capital, it seems 'implausible' that property prices are set to show much of a dip.
House price dip: Prices in London are falling for the first time since 2009, according to Rics
It said that if demand from potential buyers starts to pick up from its current sluggish levels, the increased competition for the few properties on the market that this causes could rapidly result in an upswing in property prices.
Across the UK, a net balance of 11 per cent more surveyors observed house prices generally increasing rather than decreasing in December, marking the weakest pace of price growth that Rics has recorded since May 2013.
London saw rapid property price growth in early 2014, but in December, an overall balance of 36 per cent of surveyors in the capital reported values falling rather than rising.
The new stamp duty rules mean people buying homes in the capital are likely to pay more in stamp duty because the value of the properties in the capital are higher.
Before the changes announced in the 2014 Autumn Statement it was charged in bands from £125,000 upwards between 1 per cent and 7 per cent depending on the property value.
From December 4 2014, bands are now 0 per cent up to £125,000; 2 per cent to £250,000; 5 per cent to £925,000; 10 per cent to £1.5million and 12 per cent above that.
Under the new system anyone buying a home costing under £937,000 should pay less or the same, Treasury figures show and this means 98 per cent of buyers will pay less stamp duty than before.
A report last week by the Centre for Economics and Business Research predicted that London house prices will fall by 3.3 per cent and nationally prices will drop by 0.6 per cent.
Overall, regions that have seen house prices grow slower in the last few years are now showing the stronger increases as they edge up to and beyond their pre-crisis peak.
Upward trend: Property prices are rising in Northern Ireland after a slow start to the housing market recovery
Northern Ireland, where values have been recovering more slowly towards the levels seen before the financial downturn, saw the strongest price growth in December. A balance of 65 per cent more surveyors there reported prices rising rather than falling.
Scotland showed the second strongest upswing in prices in December, with a balance of 45 per cent more surveyors there reporting price rises. Regions in northern England also showed relatively strong price growth in December, with 34 per cent more surveyors in the North West reporting prices increasing and 23 per cent more surveyors in the North reporting rising values.
In Wales, a balance of 6 per cent of surveyors saw prices increase rather than decrease in December, while in the East and West Midlands this figure was 9 per cent, in the South West it was 16 per cent and in the South East it was 24 per cent.
Rics said that the number of new house hunters entering the market has been falling for six months in a row. Meanwhile, the number of properties on the market for them to choose from is 'close to historic lows', it said, with the volume of new properties being listed having fallen for 10 out of the last 12 months.
Simon Rubinsohn, Rics' chief economist, said: 'There is a risk that with so little housing available, any pick-up in demand could rapidly feed through into higher prices rather than higher sales.'
Housing market experts have predicted that the reforms to stamp duty which were unveiled by the Government in December could prompt more people to buy and sell homes in the coming months, as for the majority of people who pay stamp duty, the cost will be lower than it was under the old system. But people buying the most expensive properties, many of which are situated in London, will pay more under the new stamp duty system.
Reform: The Chancellor, George Osborne announced major changes to stamp duty in the Autumn Statement
Rics said there is general optimism among its members that the stamp duty reforms will deliver a 2-5 per cent boost in both house sales and house prices over the next 12 months, although surveyors in London expect to see sales decrease by 5-10 per cent and prices fall by 2-5 per cent as a result of the changes.
Mr Rubinsohn said that as well as increased signs of buyer caution generally, responses to its latest survey suggest that a mood of uncertainty caused by the approaching general election also appears to be contributing to the recent softening in the housing market.
But he added that with the number of properties coming to market having remained flat for most of the last year, 'it seems implausible that the dip in demand will result in very much of a decline in house prices'.
Last week, Halifax predicted that house prices will rise by just half of the 7.8 per cent increase it reported in 2014, with them estimating growth of between 3 and 5 per cent.
The lender said the rate of annual house price growth has been slowing month-on-month since the 10.2 per cent peak seen in July 2014.
Earlier this week official figures showed that property prices edged up by just 0.2 per cent on a seasonally-adjusted basis between October and November maintaining the average value of a UK home at £271,000, below the historic high of £274,000 reached in August 2014.