London braced for a drop in house prices

LONDON’S house prices continue to surge ahead for the moment, riding roughshod over the decline that holds the rest of the country in its grip, though the capital is expected to succumb to falling prices in the coming months.

London was one of only two regions which reported material price hikes in July, according to the latest Royal Institution of Chartered Surveyors (RICS) housing market survey. A total of 14 per cent more surveyors in the capital reported rising prices over the month than those who witnessed a decline, RICS said – though this represented a significant drop from the 31 per cent discrepancy between rising and falling price reports in June.

The survey, which has a good record in revealing market trends first, showed that demand for property, measured by the net balance of new buyer enquiries, remained positive, though it halved from six to just three per cent, reflecting caution fuelled by mortgage lending restrictions and wider economic uncertainty.

RICS said that the market is moving more towards a glut of supply, showing that the “balance of power is shifting from sellers to buyers”. And 28 per cent more surveyors reported a hike in new vendor instructions than those who reported a fall, up from a differential of 18 per cent in June.

RICS said that the property sector had turned sharply bearish on the outlook for house prices in the coming months, however. A balance of 15 per cent of surveyors said in July they expected a decline in prices, whereas in June a narrow five per cent expected prices to rise. The Midlands, Wales and the north of England saw the biggest falls, according to RICS.

“The fall in the RICS house price measure is a reflection of both the increase in supply following the scrapping of HIPS and the more cautious stance from buyers,” RICS London director Amanda Gardiner said.