LONDON - Expectations for UK house prices fell to the lowest level since 2005 last month, after five interest rate increases in the past year deterred homebuyers, the Royal Institution of Chartered Surveyors said.
The number of real estate agents and surveyors saying they expect prices to decline
over the next three months outnumbered those forecasting gains by 9 percentage points from 0.7 percentage point in June, London-based RICS said - the most pessimistic reading since June 2005. A gauge of house price inflation in July stayed close to the lowest since January 2006.
The Bank of England this month signalled it is ready to raise its benchmark rate again to rein in inflation. A rate increase would swell borrowing costs for Britons already laden with record debt of £1.3 trillion ($3.57 trillion). "Buyer activity has pulled back over fears that we may have seen the top of the market," Jeremy Leaf, an RICS spokesman, said. "The combination of softening demand and supply is causing market conditions to weaken further."
The Bank of England raised its key rate to a six-year high of 5.75 per cent in July. The five increases over the past year have boosted the monthly repayment on an average £200,000 mortgage by about £100, according to the Council of Mortgage Lenders.
"The recent interest rate hike has subdued the market and prices are relatively static," said Jonathan Clayton, an estate agent at Bentley Higgs in Blackpool, northwest England.
New buyer enquiries declined at the fastest pace since August 2004, dropping in all regions except Wales, RICS said. At the same time, the stock of unsold property on surveyors' books increased to the highest since January, the report showed.
The RICS report also showed signs of a slowdown in London, which has led the UK's housing boom over the past decade. While the market is still "very strong", the balance of surveyors reporting price increases fell to 51 percentage points, the lowest since January 2006, from 57 in June.
- Bloomberg
