An article on the RICS website published earlier this month, has suggested that rhetoric from the Bank of England has had a drag on activity. With house prices across the country remaining high, the level of demand for property has slowed right down in a trend that many in the RICS claim is due to actions from the Bank of England.
The RICS UK Residential Market Survey, which provides a sentiment indicator of conditions in the UK residential sales and lettings market, showed earlier this month that house prices had remained positive across the UK but there had been a decrease in house buying activity as a result of rhetoric from the Mortgage Market Review and the Bank of England.
Across the country, over 50% of respondents saw an increase in house prices in June, with the South East and Northern Ireland in particular experiencing the strongest price gains. Respondents also indicated that the rate of price growth in London was easing.
The survey also noted that despite the high prices across the country, demand was at its lowest level since January 2013. In London a cautious air has affected the buying market, with demand falling for the second month in a row. This had been preceded by 15 months of increases.
The newly agreed sales balance is also showing the most subdued pace of increase since the autumn of 2012, which is a good indicator of a slowing market activity.
The RICS survey also suggested that the actions of the Bank of England had made an impact on the number of homebuyers. As the Bank of England introduced a 15% cap on high mortgages, many of the survey’s respondents assumed banks to be lending less, with a further drop in loan-to-value ratios among first time buyers.
Whilst the actions of the Bank of England are unlikely on their own to have an immediate impact on the market, Simon Rubinsohn chief economist with the RICS did claim that “rhetoric from key officials at the Bank, including Mark Carney, alongside the consequences of the introduction of the Mortgage Market Review, are already slowing momentum particularly in London.”
Mr. Rubinsohn went on to say, “buyer enquiries in the capital are now slipping back which suggests that the very sharp upward move in prices will flatten over the coming months.”
Rubinsohn said that recovery should “remain intact.”
As a result of the slowing demand for homes, and also an increased supply, meant that few respondents expected prices to rise anymore over the next few months. 26%, down from 46% in May’s survey, believed that the market would see a rise in house prices over the next 3 months.
Taken from the RICS Website – Property Market Responds to Bank of England Rhetoric
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