Enquiries from new buyers fell for the seventh month in a row during June as the property market showed further signs of cooling, research indicated today.
The Royal Institution of Chartered Surveyors said tougher lending rules under the Mortgage Market Review were causing a slow down in property sales.
At the same time, speculation about when interest rates will start rising, combined with heightened rhetoric from the Bank of England about the risks of the property market have increased buyer caution.
The group said demand for property was now at its lowest level since the beginning of 2013, with the London market particularly affected by the new wariness among buyers.
The lower level of demand led to a slowdown in newly agreed sales, with this measure recording its most subdued pace of increase since the autumn of 2012.
At the same time, the number of new properties coming on to the market increased for the first time since December 2013, helping to further ease the mismatch between supply and demand.
The Bank of England has indicated that interest rates could start to rise by the end of this year.
It has also introduced measures to help cool the property market, after warning that booming house prices could threaten the UK’s economic recovery.
Under these measures lenders must ensure no more than 15 per cent of new mortgages go to people borrowing more than 4.5 times their income.
Banks must also check whether borrowers could continue to afford their mortgages if interest rates rose by 3 per cent.
Simon Rubinsohn, RICS chief economist, said: “The Bank of England’s recent introduction of a ceiling on high loan to income lending and a 3 per cent interest rate stress test is unlikely on its own to have an immediate influence on the market.
“However, rhetoric from key officials at the Bank including Mark Carney, alongside the consequences of the introduction of the MMR are already slowing momentum particularly in London.
“Buyer enquiries in the capital are now slipping back which suggests that the very sharp upward move in prices will flatten over the coming months.”
But he added that he expected the “more hard fought recovery” in the rest of the country to remain intact.
Despite the slower market, a balance of 53 per cent of surveyors still reported house price increases during June, although the figure was down slightly from 56 per cent in May.
Surveyors said prices rose in all 12 regions of the UK, with the South East and Northern Ireland experiencing the strongest growth for the second consecutive month.
But the group added that the rate of price growth in London appeared to be easing.
Going forward, the balance of surveyors expecting prices to rise rather than fall during the coming three months dropped to 26 per cent, down from 46 per cent in May, due to slowing demand and increased supply.
Today’s figures come the day after Halifax said house prices rose at an annual rate of 8.8 per cent in June, although they fell by 0.6 per cent during the month itself.
The typical property in the UK currently costs £260,311, according to Zoopla.
House prices rose at their fastest rate for nearly seven years during June, figures showed today.
The average cost of a home was 8.8 per cent higher during the three months to the end of June than it had been a year earlier, according to mortgage lender Halifax.
The rise, which was the biggest annual gain seen since October 2007, left the typical UK property costing £183,462.
But house prices slipped by 0.6 per cent during June itself, the fourth monthly fall recorded by the Halifax index since December.
The group stressed that monthly house price changes could be volatile, with June’s fall coming after values surged by 4 per cent in May.
It added that the three-month-on-three-month change, which is considered to be a more reliable indicator of underlying market trends, showed prices rising by 2.3 per cent.
House price changes according to this measure have now remained in a narrow range of 2 per cent to 2.3 per cent since June last year.
Stephen Noakes, mortgages director at Halifax, said: “Housing demand continues to be supported by an economic recovery that is gathering pace, with employment levels growing and rising consumer confidence, although real earnings growth remains sluggish.”
Today’s figures are in line with data reported by Nationwide, which also showed strong annual gains in June, with house prices rising by 11.8 per cent.
The jump left the average property costing £188,903, the first time they have surpassed the 2007 peak reached before the housing market correction.
the heat has come out of the housing market
The strong house price growth seen in recent months has led to speculation that a bubble may be building up in the property market.
In June, the Bank of England’s Financial Policy Committee announced measures aimed at ensuring a house price boom does not threaten the economic recovery.
The steps to cool the market included a cap under that lenders must ensure no more than 15 per cent of new mortgages went to people borrowing more than 4.5 times their income.
It also introduced a new stress test, under which banks must check whether borrowers could continue to afford their mortgages if interest rates rose by 3 per cent.
But the measures were less draconian than had been predicted and came amid signs that the housing market was already beginning to moderate.
New buyer enquiries fell for the sixth consecutive month during May, according to the Royal Institution of Chartered Surveyors.
HM Revenue & Customs also reported that property sales fell by 3 per cent during the month, to stand below 100,000 for the first time in six months.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “With estate agents reporting that applicant levels are falling, fewer sealed bids and packed open houses, some moderation is returning to the market.
“As more property comes up for sale, with vendors worrying that they may have missed the boat, the heat has come out of the housing market.”
Meanwhile, speculation that the Bank of England’s Monetary Policy Committee could start raising interest rates by the end of this year, has left potential buyers cautious about taking on high levels of debt.
The typical property in the UK currently costs £260,311, according to Zoopla.
Raising interest rates too soon could damage the UK’s economic recovery, a business group warned today.
The influential British Chambers of Commerce (BCC) warned the Bank of England that a premature hike to the official cost of borrowing could hurt business confidence, amid signs of weakness in its second quarter survey.
John Longworth, director general of the BCC, warned that higher borrowing costs could “limit the growth ambitions among the very firms we are counting on to drive the recovery.”
The warning comes amid ongoing speculation over when the Bank’s Monetary Policy Committee will begin to increase interest rates.
Bank Governor Mark Carney has previously warned that interest rates are likely to start rising from their record low of 0.5 per cent sooner than markets expect.
His comments led to speculation that the first increase could come before the end of this year, although he later downplayed the chances of a rate rise in the near future.
Despite this, his earlier comments were enough to cause a spike in swap rates, upon which fixed rate mortgages are based, leading to some of the most competitive deals being withdrawn from the market.
risks to the recovery from raising rates prematurely are much greater than the risks of waiting a little longer.
The leading two-year fixed rate loan for someone with a 25 per cent deposit recently jumped from 1.89 per cent to 1.98 per cent, according to financial information groupMoneyfacts.co.uk.
Increases in the cost of fixed rate deals were seen across the board, regardless of the size of the deposit borrowers had.
The BCC’s survey, which is closely watched by both the Bank of England and the Treasury, was positive overall and pointed to continued economic growth.
But most key balances in the survey fell compared with the first quarter of the year, particularly for services, export and investment, indicating a dip in businesses performance.
Concerns about future interest rates were also higher among the 7,000 firms questioned than they had been in the previous quarter.
The BCC said the falls in its balances – which represent the difference between firms reporting an improvement against those reporting a deterioration – were unsurprising after the economy “jolted forward” during the first quarter.
It also stressed that despite the drop, all of the balances for both manufacturing and services were above their long-term averages.
But Longworth added: “These results reinforce the case against the Bank of England making any hasty decisions on raising interest rates in the very short-term.
“We must nurture the business confidence we are seeing at present by giving firms the security of working in a low interest rate environment for the foreseeable future – with eventual rises both moderate and predictable.”
David Kern, chief economist at the BCC, also called on the MPC to restore clarity to its future earnings guidance, and reassure businesses that from next year they would face only gradual increases in interest rates.
He said: “With inflation well below target and earnings still rising by less than 1 per cent per year, the risks to the recovery from raising rates prematurely are much greater than the risks of waiting a little longer.”
The MPC is widely expected to leave interest rates unchanged when it announces the results of its monthly meeting this week.
When it does start to increase the cost of borrowing, a 0.25 per cent change to the Bank Rate will add around £22 a month to a £150,000 mortgage on a variable rate.
Former child star Charlotte Church claims her millions have dried up and that she’ll have to work for the rest of the life, it was reported today.
The Voice of an Angel singer Charlotte – now 28 – was said to be worth £25m when she was only 17 years old.
But despite selling more than 10 million records, she confesses to not being as rich as some people think.
Speaking to BBC One Wales, she said: “I will have to work for the rest of my life. Not because I want to but because I have to.
“I always understood that all that stuff isn’t important and my career was not the be and end all.”
The mother of two previously lived in a luxury home in Cardiff with her ex-husband rugby star Gavin Henson.
She now lives in a 1930s villa in the Vale of Glamorgan where she lives with her children and partner Jonathan Powell.
Properties for sale in the Vale of Glamorgan:
1. Four bedroom detached house for offers over £400,000.
2. Three bedroom detached house for £159,000.
3. Seven bedroom detached house for £895,000.
Less than one in 10 people who work in London can afford to buy a typical property within an hour’s commute of the capital, exclusive research from Zoopla can reveal.
The figures are the latest evidence of the struggle ordinary workers, on an average wage, have when it comes to buying a home.
With property prices in London rising more than £60,000 in the past year alone, many potential buyers will be widening their search – particularly if they have families and are looking for more space.
But the Zoopla figures show they will be forced to look further afield than even they anticipated.
Just nine per cent of properties for sale within an hour’s commute of the capital are within a buyer’s budget if they earn an average London salary of £33,965.
Jonathan Harris, of mortgage brokers Anderson Harris, said: “It is not just London which has enjoyed significant house price growth, but the surrounding areas have also seen prices rise over the past few months. This has meant that those spreading their net and looking to buy cheaper property outside of the capital are finding it is not that easy with family homes in particular at a premium.
“Commuters are having to look further afield beyond the magic ‘one hour maximum’ commute for an affordable home, which is do-able if you don’t have to be in London every day of the week. Otherwise, it can put a strain on family life, with fathers in particular having to leave the house before the children are awake and returning after they’ve gone to bed.”
The calculation is based on a buyer with a 25 per cent deposit and borrowing a maximum of 4.5 times their annual salary.
It means someone earning around £33,000 would be able to afford to buy a property valued at £200,000.
Zoopla can reveal a worker needs to earn more than £90,000 a year to buy an average London property valued at £567,392 – restricting them to less than 70 per cent of homes for sale that are within an hour’s commute of London.
The figures are based on a maximum income multiple of 4.5 times income. Borrowers have previously been able to secure higher income multiples, but fears about the property market overheating in London have led to the Bank of England introducing new measures.
It is restricting the number of homeowners able to borrow more than this amount.
By October, banks will only be able to lend 15 per cent of their total residential mortgages at or above this level.
The Zoopla figures also reveal that despite a £282,500 income, workers would still not be able to afford 5 per cent of homes within an hour’s commute of the capital.