After UK house price growth slowed in June, is the UK housing market now finally cooling down?

Prices have dropped a surprise 0.2 per cent in June (Source: Getty)

Augustin Eden, a research analyst at Accendo Markets, says Yes

The market is finally cooling down – to the point where it may actually start to contract on an annual basis. There is much to be done until house prices are actually “affordable”, of course. A Bank of England interest rate rise would deter buyers and help the market cool off further – and this will happen.

Furthermore, it seems that housing market buoyancy following the December 2014 changes to stamp duty land tax rates has now passed, and house prices aren’t rising at anywhere near the rate they were in the second quarter of 2014.

If you want some easier-to-digest evidence that the market as a whole is cooling off, look at Sunderland, where prices are down 4 per cent on the year, and Belfast, where they’re down 3 per cent.

Looking at this from the viewpoint of a buyer in London is understandable, but the bigger picture outlook is much more realistic. London is effectively an outlier, and should be discounted.

Howard Archer, chief European and UK economist at IHS Global Insight, says No

Despite this dip, house prices will be firmer over the second half of 2015 amid improving activity. Mortgage approvals in May stood 8.7 per cent above their November 2014 low, and the latest survey evidence from Rightmove and the Rics indicate a pick-up in buyer interest since May’s election.

We expect support to the housing market to come from current very low mortgage rates, strengthening earnings growth, rising employment and elevated consumer confidence. The stamp duty reform in December is also supportive. Meanwhile, limited supply of houses will likely support prices.

Nevertheless, the upside for housing market activity and prices is expected to be constrained by more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders, and the likelihood that interest rates will start rising gradually from the first quarter of 2016.

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