London property market stalls as buyers resist higher prices
Following sharp value increases over the past year, London homebuyers turn cautious amid fears of a bubble and higher borrowing costs
London's property market stagnated last month for a second month as buyers were reluctant to accept high asking prices amid the prospect of increasing borrowing costs, Hometrack said.
The survey of real estate agents showed values were unchanged in a "stark" change from the sharp increases over the past year that helped propel national prices to a record. Across England and Wales, values grew 0.1 per cent, bolstered by gains in commuter towns in the southeast.
Nationwide Building Society offered a more upbeat assessment, with its index showing prices up 0.8 per cent last month.
There was "evidence of growing resistance to rapid price rises in the London market", said Richard Donnell, a director of research at Hometrack. "Talk of a housing bubble and warnings from the Bank of England have impacted sentiment."
In London, 11 per cent of postcode districts registered price increases, down from 87 per cent in February, Hometrack said. Homes in the capital took an average of 4.9 weeks to sell, up from 4.3 weeks in July.
While the BOE's benchmark interest rate has been at a record-low 0.5 per cent since March 2009, policymakers Martin Weale and Ian McCafferty voted for an increase this month. Investors are betting the rate will increase to 0.75 per cent in May next year, according to futures contracts.
The Hometrack data adds to signs of a cooling market after BOE deputy governor Ben Broadbent said in an interview in July that "the edge is coming off" property. The BOE introduced measures in June to limit riskier mortgages, months after new rules came into force requiring tougher affordability tests.
In its report, Nationwide said home prices rose 11 per cent last month from a year earlier. Nationwide chief economist Robert Gardner said the outlook was "highly uncertain."
While the prospect of interest rate increases and weak wage growth might temper demand, "the brightening economic outlook is likely to provide ongoing support", Gardner said.
Hometrack said in England and Wales, the number of new buyers registering with estate agents fell 0.9 per cent last month. The number of properties listed for sale increased 0.1 per cent after a 1.6 per cent gain in July.
Indicators were "pointing to a loss of momentum", Donnell said. "We expect a continued shift towards a seller's market in the face of weaker, more price-sensitive demand."
In a separate report on August 29, GfK NOP said its consumer sentiment index rose 3 points to 1, matching June's reading, which was the highest since March 2005.
Gauges of Britons' outlook for their personal financial situation over the coming year and their assessment of the outlook for the economy also increased.
"It looks as if we might be in a new period of relative stability," said Nick Moon, the managing director of social research at GfK. "There is no guarantee how long this stable position will last - a rush of good or bad economic news could set off a marked rise or fall, but things could stay like this for a while."