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House price growth to collapse in London



House prices in the capital to merely creep up in the next year, RICS survey predicts

House price growth to collapse in London

House price growth to collapse in London

House price growth expectations have plummeted over the last quarter with property professionals forecasting a rise of just 1.9pc over the next 12 months. Photo: Alamy

Anna White

By  Anna White, Property and enterprise correspondent

House price growth in London is set to collapse with property professionals expecting values to merely creep up by 1.9pc over the next 12 months.

The capital has become accustomed to soaring house prices over the last year as pent up demand following the recession, a lack of supply and influx of cash buyers have boosted values.

However, expectations of future growth have come crashing down according to the latest data from the Royal Institution of Chartered Surveyors (RICS).

Back in March the nationwide group of property surveyors, who are questioned every month, predicted a 7.4pc rise in London house prices in the following 12 months. This has forecast slid to 1.9pc in July for the next year due to stretched affordability leading to a fall in demand.

Londoners saw buyer demand fall more steeply than anywhere else in the country.

Last October, 100pc of RICS respondents based in London reported that they saw house prices increase in the three preceding months, while the latest data shows that in the period of May to July, only 10pc of London respondents saw an increase.

"We have seen in London a pretty marked shift in the supply and demand balance, moving away from a very hot spring selling period to more sober demand over the last few months, which is no bad thing," said Adam Challis, head of residential research at JLL.

The capital has seen a gradual cooling of the month-on-month growth rate. The latest Land Registry figures recorded unprecedented high completed prices in June with the average value in Greater London hitting 533,489 up 12pc on the same time last year, enticing vendors to try their luck.

Just as these prices have started to deter the prospective buyer, new sellers are rushing to put their homes on the market and cash in on the peak before growth stalls in the midst of a regulatory clamp down on lending practices and talk of interest rate rises.

"Prices have got very toppy - it no longer feels the most sensible time to buy and we have reached a tipping point in the market," said Mr Challis. "But we still think that while central London rebalances itself, growth in the commuter belt, based on stronger fundamentals, will outperform the core."

Demand also fell across the rest of the country in July for the first time this year indicating a fundamental slow down in the UK housing market.

The RICS report found that 49pc of surveyors felt prices will continue to go up, down from a majority of 52pc in June and 56pc in May, showing a switch in sentiment among housing market professionals.

In January the RICS members expected national prices to rise by 4pc over the next 12 months, this forecast has now dropped to 2.6pc.

In fact, only surveyors in Scotland predicted a rise in the annual growth rate from the 3.1pc that was projected last month to 3.3pc in July.

"A range of policy initiatives adopted by the Bank of England in recent months alongside heightened expectations surrounding a turn in the interest rate cycle has clearly had an impact on sentiment in the market," said Simon Rubinsohn, RICS chief economist.

"[Outside London] the market in general is showing a greater degree of resilience, but that largely reflects the fact that in some areas the recovery has only recently taken hold and affordability is rather less stretched. Members now expect price gains over the next year to be faster outside of the capital," he said.


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