Weakening demand and a continued slowing in the rate of house price growth is more than just a seasonal slowdown.
Tougher lending rules and changing buyer sentiment have impacted demand. London, which has been the engine for house price growth, has seen a particularly pronounced slowdown in the last month with a small proportion of markets in the capital now registering price falls.
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 the launch of Help to Buy, but it now appears that market sentiment is starting to change.”
House prices were unchanged in London over the month, the lowest monthly change for 19 months (Dec-12).
Just 12% of markets registered a price rise in July with 11% of London markets registering lower prices.
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.
Donnell said: "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.”
Hometrack’s national monthly housing market survey is based on a monthly survey of estate agents and surveyors across all postcode districts across England and Wales.
