UK housing market cools down as weather warms up

For Sale

The prices demanded by sellers putting their homes on the market have fallen for the first time this year, in the latest sign that some of the heat is coming out of the UK housing market.

The average asking price fell by 0.8%, or £2,116, to £270,159 in July, according to the property website Rightmove. It was the first monthly drop since December and compared with a 0.3% rise in July 2013.

Miles Shipside, director at Rightmove, said the fall could partly be explained by a normal summer lull, but that stricter mortgage rules and heightened expectations of an interest rate rise sooner rather than later may also have played a part.

He said: "A price fall in July is not unexpected as prospective buyers turn their attention to the summer holidays, not to mention the added distraction of an engaging World Cup.

"Buyer confidence may also have taken a knock with suggestions that mortgages are becoming harder to get and repayments may get more costly sooner than originally anticipated, should the rumours of an interest rate rise before the next election come true."

The fall in asking prices was widespread across England and Wales, and included the south-east and Greater London, which are the most expensive regions. The only areas to record a rise in July were the north -west, the west Midlands and East Anglia.

Lower asking prices in July pulled the annual rate of growth down to 6.5% from 7.7%. It was the latest sign that frenetic activity in the housing market might be easing off. Mortgage approvals fell for a fourth month in May, according to Bank of England data, and earlier this month, the Royal Institution of Chartered Surveyors said there was a heightened sense of caution in the market.

Despite July's fall, Rightmove is now expecting average asking prices to rise by 8% in 2014 overall, which is at the top end of its earlier forecast for an increase of 6-8%. It said a combination of lack of supply in the most popular areas in and around London, a strengthening market in northern cities such as Manchester, Leeds, York and Liverpool, and a proliferation of cash-rich third-time buyers, would underpin asking prices for the remainder of the year.

The average time it took to sell a property fell to 65 days in the second quarter of the year, from 75 days a year earlier.Shipside said that while figures from the Bank of England showed mortgage approvals have slowed since late 2013, they were higher in the year to date compared with the same period last year.

"Market conditions still compare favourably with this time last year, with growth in both the economy and employment, plus a comparative thaw in mortgage availability. The 'year to move' window looks likely to be open for a while longer yet, though we expect market activity will slow down in the run-up to the election in May next year."

One of the key drivers of rising house prices over recent months has been a lack of properties coming onto the market. Rightmove said that although supply was 10% higher in 2014 so far than the same period in 2013, Britain was still suffering from a structural deficit in housing stock, with demand outstripping supply in the more popular areas. Demand in the first half was up 27%, to an average of 3.7m enquiries per month.

Powered by Guardian.co.ukThis article was written by Angela Monaghan, for The Guardian on Monday 21st July 2014 06.00 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

Bank Workers CharityBank Workers Charity - Supporting bank workers

Register for Financial Markets News Alerts