House price freeze brightens prospects for the first-timers

House prices in England have frozen for the first time in a year, according to a new report from the Royal Institute of Chartered Surveyors.

Property prices in London and the South East have fallen in July by as much as 2 per cent - while in the Midlands and East Anglia, house prices have remained largely the same.

The boom has continued apace in Scotland and the North-East with surveyors reporting "robust" price rises.

RICS said the stabilising of the market for the first time in a year - since the Iraq conflict, indicated an 'air of caution' from buyers and sellers alike.

The freeze and fall indicates the Bank of England has successfully stalled the housing market and curbed nine months of runaway growth.

Earlier this year, BoE governor Mervyn King, said he believed there would be a "sharp slowing in house price inflation."

Ian Perry, housing spokesman at RICS, reflected: "Buyers and sellers are showing a noticeable air of caution.

"Unlike last year, the supply of new property coming to the market has remained low and kept market conditions fairly tight, which is a major factor underpinning prices."

He added that signs from the BoE suggest interest rates are less likely to increase significantly from now until the end of the year.

"When the market cools it provides a great opportunity for first time buyers. We expect a steady demand for property as we go into the autumn but only on those that are correctly priced."

The RICS report shows that regardless of seasonal variation, just 3 per cent of surveyors reported a rise in prices instead of a fall.

This compares with 17 per cent in June and a recent high of 45 per cent in March.

In Scotland, the housing boom continues undisturbed with 81 per cent saying prices were climbing steadily.

Overall, in the North, 41 per cent reported rising costs of property, while 25 per cent of those indicated quarterly increases between five and eight per cent.

This reveals an expected regional divide, as thirty per cent of London surveyors said that costs during July fell on average between zero and two per cent.

The mixed picture has prompted some economist to greet the 'big freeze' cautiously over forecasts a renewal of sales will begin after the summer break.

Mark Mahon, at Lombard Research group, said: "From a policymaker's point of view it is encouraging if the housing market is slowing. But one month alone, doesn't constitute a change of trend."

The RICS survey comes as key economic indicators appear to
support claims that the house market is softening.

Last month, BoE mortgage approval figures showed numbers have fallen to 114,00 in June from 124,000 the previous month.

 

18th August 2004

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