House prices in June remained positive across the UK but the Mortgage Market Review and the Bank of England’s words are having a drag on activity, according to the Royal Institution of Chartered Surveyors.
A net balance of 53 per cent of nationwide Rics respondents reported an increase in house prices in June, down from 56 per cent in May, and prices rose in each of the 12 areas represented.
The south east and Northern Ireland experienced the strongest price gains for the second consecutive month, while the rate of price growth in the London market appeared to be easing.
Demand for property stands at its slowest pace since the beginning of 2013, with the London market particularly affected by the increased air of caution, where buyer demand fell for the second consecutive month in June.
However, this followed 15 successive monthly increases.
Last month the Bank of England introduced a 15 per cent cap on high loan-to-value mortgages and Rics reported average LTV ratios among first-time buyers dropped for the second consecutive month to 85.1 per cent, from 85.3 per cent in April.
Attention has focused on high income multiple loans, which Bank of England governor Mark Carney singled out in a television interview in June and which the IMF referenced in a warning on housing market risks.
Also last month, the European Commission called on the chancellor in a report to “deploy appropriate measures to respond to the rapid increases in property prices, notably in London, for example by adjusting the Help to Buy 2 scheme and mitigating risks related to high mortgage indebtedness”.
The coalition must take “action” to increase housing supply, the EC report added.
Simon Rubinsohn, chief economist of Rics, said: “The Bank of England’s recent introduction of a ceiling on high loan to income lending and a 3 per cent interest rate stress test is unlikely on its own to have an immediate influence on the market.
“However, 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.
“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. Elsewhere around the country we believe the more hard fought recovery should remain intact.”
