This is more than seasonal, says Hometrack, as housing market growth slows

The pace of house price growth has slowed to the weakest in 18 months – and the London market is cooling “rapidly” and “dramatically”.

Reporting this morning, Hometrack said that weakening demand and a slowing in property price inflation are “more than just a seasonal slowdown”.

It said that tougher lending rules and changing buyer sentiment have both had an impact on demand.

In London, Hometrack says that 11% of areas are now registering price falls, while only 12% of London postcodes registered price gains in July.

Reporting for July, Hometrack says that house prices nationally crept up just 0.1% – compared with 0.3% in June and 0.5% in May.

The number of new applicants fell by 0.9% and sales agreed dipped very slightly by 0.3%.

The proportion of the asking price being achieved is also starting to decline nationally, as agents “find it hard to push prices ahead in the face of weaker demand”.

Richard Donnell, director of research at Hometrack, said: “Seasonal factors always lead to a slowdown in demand and market activity in the summer months, but it is clear that there are bigger forces at work with a pronounced loss of momentum in the London housing market in the last three months.

“The lead indicators in the survey have pointed to a slowdown in the rate of growth for the last two months, in part due to warnings from the Bank of England and others of a possible house price bubble.

“Demand for mortgages has also been slowing for several months now. There’s a growing element of caution from buyers about the market outlook as the prospect of future interest rate rises looms, and the new tougher mortgage market checks implemented as part of the Mortgage Market Review (MMR) impact on demand.

“The housing market has tended to move in ‘mini cycles’ over the last few years, each spanning 18-24 months, largely on the back of changing buyer sentiment.

“Overall market conditions have been strong since early 2013, as a result of pent-up demand returning to the market outside London and with buyers encouraged by low mortgage rates and Help to Buy, but it now appears that market sentiment is starting to change.”

He went on: “This is the first time in four years that London, which has long been the engine of the housing market, has a smaller proportion of markets registering price gains than in the regions.

“House price growth across the rest of the country, where price rises have been far less pronounced in recent years, could well be sustained into the autumn.

“While seasonal factors have impacted the level of price growth in the regions outside London, there is a slowing in the rate of growth but no evidence of any price falls.”

Ref: Property Industry Eye