The momentum behind London's property boom appears to be waning, according to a survey released in late July. This survey adds to the growing signs that the rapid house price growth in Britain is beginning to moderate.
The Royal Institution of Chartered Surveyors' (RICS) monthly house price balance fell to 49 in July, marking its weakest reading since February and slightly below the forecasts in a Reuters poll of economists. The June figure was also revised downwards slightly to 52.
"The shift in mood music among potential buyers in the London market has been particularly pronounced but that is in a sense consistent with the move to a more sustainable market in the capital. Significantly, members now expect price gains over the next year to be faster outside of the capital than in it" said Simon Rubinsohn, RICS chief economist.
In London, sales and new buyer enquiries have decreased more sharply than in other regions of the country. Only a net balance of 10% of London respondents reported rising prices in July, a significant drop from 30% in June. This decline in buyer enquiries in London is the fastest rate seen since April 2008.
Despite this, it is important to note that official figures showed a record increase in London house prices in May, with a 20.1% rise compared to the previous year.
The Bank of England (BoE) Governor, Mark Carney, has previously identified the housing market as the biggest domestic risk to Britain's financial stability. Therefore, signs of a slowdown in the market are likely to be welcomed by BoE officials.
A separate survey by mortgage lender Nationwide showed that British house prices stagnated in July after experiencing strong growth in June. This cooling effect has been attributed to tougher checks on mortgage lending.
Governor Carney, speaking after the BoE published new economic forecasts, noted that the introduction of more stringent mortgage affordability tests in April likely contributed to the slowing housing market activity. However, he cautioned that this slowdown could be temporary.
Contrastingly, another lender, Halifax, reported that house prices rose at the fastest annual rate last month since the start of the financial crisis, highlighting the mixed signals from different surveys.
Looking ahead, RICS surveyors expect price momentum to remain robust in the near term. The sales-to-stock measure of market slack increased to 41 in July, the highest level since 2007. However, RICS also noted that surveyors were less optimistic about price expectations over a five-year horizon.
For homeowners in London, these developments could bring several positive outcomes:
Stabilising Market: The easing of rapid house price growth may lead to a more stable and predictable housing market, reducing the risk of a bubble.
Improved Affordability: A slowdown in price increases could improve affordability, making it easier for first-time buyers to enter the market and for existing homeowners to move up the property ladder.
Financial Stability: The BoE's focus on housing market stability could lead to more sustainable economic conditions, benefiting homeowners through potentially lower interest rates and more secure mortgage terms.
Investment Opportunities: With the market showing signs of moderating, there could be more opportunities for investment in property without the fear of overheating.
While the immediate future shows signs of robust price momentum, the longer-term outlook suggests a more tempered market. Homeowners should stay informed about these trends to make strategic decisions regarding their property investments.
We have assisted many Finchley homeowners looking to sell their property, and we know what buyers are looking for when searching for a new home. You can take the stress out of connecting with likely buyers by turning to an experienced estate agent in Finchley.
If you want to make an informed decision in and around Finchley’s lettings market, we are here for you. If you have any questions about the local rental market, or you need assistance, please contact David Harris & Co today. Call us on 0208 346 9122.
