LONDON: House prices in Britain are no longer rising and are falling in London at their fastest pace since 2009, the Royal Institution of Chartered Surveyors said, citing political worries and last week’s Bank of England interest rate hike.
RICS’s benchmark house price index for Britain as a whole fell more sharply than expected to +1 in October, a level consistent with flat price growth, down from +6 in September.
Economists taking part in a Reuters poll had expected a gentler fall to +4. Britain’s housing market has cooled since last year’s Brexit vote which caused a slowdown in the broader economy.
Other measures of house prices have shown a slight pickup in recent months. But RICS painted a gloomier picture, saying most regions were starting to see a drop in sales, following the trend in London.
The fall in sales mirrored a recent slide in demand from buyers and suggested sales would fall over the next 12 months.
RICS’ gauge of price expectations for the next three months fell in October to -11 from -8. With the exception of a sharp dip in June 2016 – the month of the Brexit vote – this was the weakest reading since mid-2012.
RICS chief economist Simon Rubinsohn said a lack of homes on the market, political uncertainty as Britain tries to negotiate its exit from the European Union and last week’s first interest rate hike by the Bank of England since 2007 were all taking their toll on the housing market.
First-time buyers were increasingly focusing on new-build homes which are supported by government incentives, he said. “A stagnant second-hand market is bad news for the wider economy, not just in terms of spending but also because it restricts mobility,” Rubinsohn said.
While London and the southeast of England were seeing house price falls, prices were still rising in North West England, Wales, Scotland and Northern Ireland, RICS said.
The high price of property means many people in Britain are unable to afford a home of their own, putting pressure on the finance minister Philip Hammond to encourage more homebuilding when he announces a budget plan on Nov. 22. RICS called on Hammond to lift a cap on borrowing by councils to fund homebuilding.