London’s property market stagnated for a second month in August as buyers became reluctant to accept high asking prices amid the prospect of increasing borrowing costs, Hometrack Ltd. said.
The survey of real-estate agents showed values were unchanged in a “stark” change from the sharp increases over the past year that helped propel national prices to a record. Across England and Wales, values grew 0.1 percent, bolstered by gains in commuter towns in the southeast. Nationwide Building Society offered a more upbeat assessment today, with its national index showing prices up 0.8 percent this month.
There’s “evidence of growing resistance to rapid price rises in the London market,” said Richard Donnell, director of research at Hometrack. “Talk of a housing bubble and warning from the Bank of England have impacted sentiment.”
In London, 11 percent of postcode districts registered price increases this month, down from 87 percent in February, Hometrack said. Homes in the capital took an average 4.9 weeks to sell in August, up from 4.3 weeks in July.
While the BOE’s benchmark interest rate has been at a record-low 0.5 percent since March 2009, policy makers Martin Weale and Ian McCafferty voted for an increase this month. Investors are betting the rate will increase to 0.75 percent in May, according to futures contracts.
The Hometrack data add to signs of a cooling market after BOE Deputy Governor Ben Broadbent said in an interview in July that “the edge is coming off” property. The BOE introduced measures in June to limit riskier mortgages, months after new rules came into force requiring tougher affordability tests.
In its report, Nationwide said U.K. home prices rose 11 percent in August from a year earlier. Nationwide Chief Economist Robert Gardner said the outlook is “highly uncertain.”
While the prospect of interest-rate increases and weak wage growth may temper demand, “the brightening economic outlook is likely to provide ongoing support,” he said.
Hometrack said that, across England and Wales, the number of new buyers registering with estate agents fell 0.9 percent this month. The number of properties listed for sale increased 0.1 percent after a 1.6 percent gain the previous month.
Indicators are “pointing to a loss of momentum,” Donnell said. “We expect a continued shift toward a seller’s market in the face of weaker, more price-sensitive demand.”
In a separate report today, GfK NOP Ltd. said its consumer sentiment index rose 3 points to 1 this month, matching June’s reading, which was the highest since March 2005. Gauges of Britons’ outlook for their personal financial situation over the coming year and their assessment of the outlook for the economy improved also increased.
“It looks as if we might be in a new period of relative stability,” said Nick Moon, managing director of social research at GfK. “There is no guarantee how long this stable position will last –- a rush of good or bad economic news could set off a marked rise or fall, but things could stay like this for a while.”
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