Growth in London house prices forecast to slow to 3pc

PUBLISHED : Wednesday, 13 August, 2014, 5:05am
UPDATED : Wednesday, 13 August, 2014, 6:26am

Growth in London house prices will slow to about 3 per cent next year as the prospect of higher borrowing costs forces sellers to lower their expectations, Hamptons International said in a report.

The 2015 forecast by the London-based broker is half the pace it predicted in September. Values in the city would probably climb 15.5 per cent this year, it said, more than double its previous estimate.

London's residential property values rose at their slowest pace in 15 months in June, after leading the surge in British house prices in the past year, the Royal Institution of Chartered Surveyors said last month.

Surging values in the capital prompted the Bank of England to limit riskier mortgages and introduce tougher affordability tests. The number of people saying the next 12 months was a good time to buy a British home fell to the lowest since 2011, a survey by Lloyds Banking Group showed last month.

"Despite a strengthening economy, there is now evidence of a change in sentiment across the country brought about by increasingly strong messages from the Bank of England culminating in the implementation of more stringent affordability regulations," said Fionnuala Earley, director of residential research at Hamptons.

Home prices across England and Wales would gain 8 per cent this year and 5.5 per cent in 2015, Hamptons said. It expects values in London's most expensive boroughs, Kensington & Chelsea and Westminster, to rise 10 per cent this year, up from its September forecast of 3 per cent. Next year's growth would reach 3 per cent, the firm said.