House prices rose in January at the slowest pace in two years across England and Wales, finds a housing market survey by the Royal Institution of Chartered Surveyors.
The residential market survey found that just 2% of surveyors and estate agents expected prices to increase rather than decrease over the next three months, marking the weakest growth since May 2013.
Surveyors in London were among the most pessimistic despite reports of a price war between lenders driving down the cost of mortgages. The latest data showed 49% of respondents reported prices in the capital declining and many remained downbeat about the prospects for the rest of the year.
Nationally, the number of potential new buyer enquiries fell for the seventh consecutive month. Buyers in Scotland and Northern Ireland were more plentiful and prepared to spend larger sums on a home in January than the previous month, found the poll of surveyors.
Scotland had the greatest buyer interest, with several respondents suggesting the new land and buildings transaction tax (LBTT), which replaces stamp duty from thisApril and will cut the cost of buying cheaper homes, has encouraged more first-time buyers to consider getting on the property ladder.
Northern Ireland’s housing market continued to rebound from a 50% fall in prices following the banking crash. The region registered the strongest price momentum for the fifth consecutive month, with 47% more surveyors reporting increases in prices.
RICS said that anecdotal evidence suggested a multitude of factors were having various impacts across the UK, with political uncertainty being one factor. It said the recent stamp duty reforms announced in the autumn statement by the UK government and introduced in England and Wales in December, were already providing a boost in areas such as south-west England.
Meanwhile, there were wide variations in the supply side of the market, with homes for sale restricted in the north-west and south-east of England, while in the south-west more properties had gone on to the market in recent months.
Property experts have speculated that the new stamp duty regime, which lowers the cost for cheaper homes but stings buyers of more expensive properties, badly affected the higher value market in the capital.
Simon Rubinsohn, chief economist at RICS, added that, short-term, confidence was not strong, despite the outlook for longer term sales being more upbeat.
He said: “The changes to stamp duty and introduction of LBTT in Scotland are, to varying degrees, providing an incentive to first-time buyers, but there remain a number of challenges to market, such as affordability constraints, lack of stock and caution in the run-up to the general election.
“Overall, while the RICS lead indicators suggest the level of housebuilding looks set to increase over the course of 2015, the volume of home starts will still fall considerably short of the number of new households being formed, let alone make a dent in the historic shortfall of housing across all tenures.”
A separate report by the UK’s largest firm of surveyors was more upbeat about some UK regions, especially Yorkshire and the north-west. The surveyors, e.surv, said there were 65,778 house purchase approvals in January, which represented a 9.1% increase from 60,275 approvals in December.
The rise was the largest month-on-month increase since April 2009, but failed to offset falls earlier in the year that left annual house purchase approvals down 12.9% compared to January 2014. The firm said: “This makes January 2015 the fifth consecutive month in which the number of loans has fallen on an annual basis.”
Richard Sexton, director of e.surv, said tentative signs of a revival were appearing as mortgage lenders dropped loan rates and agreed to take riskier buyers on their books. “The new year has brought a new market, and lenders have a desire to return to growth. The January lending uptick is testament to this, as borrowers key in to mortgages while interest rates remain at historic lows.”
He said the government’s Help to Buy scheme, which subsidises larger deposits, was reaching the areas that need it most, especially in the north of England. “Without Help to Buy stepping in to lift first-time buyers into the range of higher LTV loans, we can see that the north could be suffering from a real crisis. With a quarter of house purchase approvals depending on higher LTV lending in the north-west – and even more than that in Yorkshire – the scheme is providing a lifeline for buyers otherwise priced out of the lower end of the mortgage market.”
The RICS said surveyors had reported that people renting were having a tougher time; 19% more respondents reported a further rise in demand during the three months to January. Rents were likely to increase from between 4% and 4.5% annually, well ahead of inflation and annual wage rises.