London house price rises 'slowed'

The momentum of price rises in the London market has "slowed dramatically", with just 12% postcodes in the capital registering price gains in July and 11% seeing falls, its latest report found.

Hometrack said this marked the first time in four years that London, which is seen as the engine of house price growth, has had a smaller proportion of markets registering price gains than regions across England and Wales.

House prices were unchanged month-on-month in London, Wales and the North East, while they increased by 0.1% in Yorkshire and Humberside, by 0.2% in the East and West Midlands and the North West and by 0.3% in the South East and the South West.

East Anglia recorded the strongest month-on-month uplift in property values at 0.5%.

Across England and Wales, around one quarter (24%) of postcode districts saw prices increase over the month, falling back strongly from the spring, when around 50% of postcodes were recording price gains.

Around 1.5% of postcodes across the country saw prices fall month-on-month in July.

Richard Donnell, director of research at Hometrack, said the property market often ran in "mini cycles", lasting between 18 months and two years, which tended to be strongly influenced by buyer sentiment.

He said the latest cycle started around spring 2013, when the Government's flagship Help to Buy scheme, enabling people with only low deposits saved to make the jump onto the housing ladder was launched in England.

A second version of the scheme was introduced across the UK last autumn.

Mr Donnell said: "Overall, market conditions have been strong since early 2013, as a result of pent-up demand returning to the market outside London and with buyers encouraged by low mortgage rates and the launch of Help to Buy, but it now appears that market sentiment is starting to change.

"House prices were unchanged in London over the month, the lowest monthly change for 19 months."

The report said that the gap between demand for property and the supply of homes on the market had "narrowed sharply" in the last three months, with more choice for potential home buyers leading to the upward pressure on house prices easing.

The volume of new buyers registering with estate agents decreased by 0.9% in July, compared with no change in June and a 2% increase in May.

Meanwhile, the volume of properties listed for sale recorded a 1.6% increase in July.

A recent survey from the Royal Institution of Chartered Surveyors (Rics) found that the majority of London-based surveyors now expected house prices in the capital to fall in the next three months.

Rics said stricter mortgage lending rules which came into force in April and talk coming from the Bank of England were having a drag on activity.

At the end of April, new rules were imposed under the Mortgage Market Review (MMR), which force lenders to carry out more thorough checks among mortgage applicants to make sure they can truly afford their mortgage repayments.

The Bank of England has also recently announced new mortgage lending curbs, saying that loans of 4.5 times a borrower's income or higher should account for no more than 15% of new mortgages issued by lenders.

Meanwhile, there has also been speculation about when the Bank of England base rate, which has been at an historic 0.5% low for over five years, will start to increase as the economy improves.

Mr Donnell said: "There's a growing element of caution from buyers about the market outlook as the prospect of future interest rate rises looms, and the new tougher mortgage market checks implemented as part of the MMR impact on demand."

But he said that house price growth across the country generally, in places where increases in values had been less pronounced in London, "could well be sustained into the autumn".

The Hometrack report is based on a monthly survey of estate agents and surveyors about achievable selling prices across all postcode districts in England and Wales.