According to research carried out by the Royal Institution of Chartered Surveyors (Rics), house price inflation in June fell from the previous month as borrowers were said to struggle to make secured loan repayments. Despite the value of homes being reported to have risen for the 20th consecutive month, this growth was half of that recorded in May. The study indicated that 10.6 per cent more chartered surveyors reported a rise rather than a fall in house prices, down from 22.5 per cent in the previous month. Meanwhile, this figure was said to be below the long run average of 21.6 per cent.
Across Britain, Northern Ireland was reported to be driving housing costs the most "as the peace premium remains a boost to price growth". Meanwhile, Scotland and London were both said to have shown "buoyant" increases. Despite the rises, first-time buyer enquiries fell at their fastest rate since February as the effect of interest rates impacts upon consumers' affordability to make secured loan repayments. Some 15 per cent of chartered surveyors reported a fall rather than a rise in buyer enquiries in June, compared to a two per cent increase in May. New buyer enquiries were also said to have decreased all regions with the exception of Scotland, the West Midlands and Wales.
Spokesperson for Rics Ian Perry said: "House prices have finally started to cool significantly for the first time since the recent mini boom in the housing market got underway in 2006. Interest rate hikes have begun to affect the psychology of the market with potential new buyers starting to think twice before buying a home". Mr Perry added that the Bank's interest rate rise in July may not be the last as the effects of recent increases are yet to be fully felt by consumers. The Rics representative also claimed that the housing sector is set for a "softer landing" over the coming months as autumn approaches.
Figures from the financial services company also reported that confidence among surveyors about the outlook of property prices has reached a three-year low due to five interest rate rises by the Bank of England in the past year and "the prospect of more to come".
Meanwhile, a study conducted by Halifax earlier this month revealed a fall in house price growth during the second quarter of 2007. According to the firm, property values increased by two per cent during the three-month period, compared to a rise of three per cent recorded between January and March. As with the Rics study, figures from the Yorkshire-based lender also indicated that the Greater London region and Northern Ireland had help to propel the increasing value of homes.
In addition, rising immigration and demand for property from buy-to-let investors was said to have driven costs, with the average home now reported to be worth 228,790 pounds. Although chief economist Martin Ellis claimed that a shortfall in supply is set to continue to push housing prices for the remainder of 2007, he pointed out that this is set to be a lower rate than that witnessed earlier this year.
According to the financial services firm, the typical British property rose in value by 2.1 per cent during the second quarter of 2007, compared to the previous three-month period which witnessed growth of some 2.3 per cent. Now costing an average of 181,810 pounds, house prices across every region of the country were reported to have increased by at least five per cent over the last year, with some five out of 13 regions surveyed recording double-digit growth.
Commenting on the figures, Fionnuala Earley, Nationwide chief economist, said: "As per the first quarter of 2007, Northern Ireland and London led the market during April-June, with annual price growth reaching 54 and 15.7 per cent respectively." However, she added: "Even London and Northern Ireland - the two most buoyant regional markets - saw the quarterly pace of house price inflation slow." Meanwhile, the north-west was said to have seen the lowest growth during the three-month period with prices rising by 5.8 per cent. Yorkshire, the north of England and the West Midlands were also said to have seen "relative weakness" in terms of price growth.
Ms Earley added that Britain's geographical divide "remained significant" between April and June, with homes in the south of the country outstripping the north by 5.6 percentage points. Meanwhile, property in the regions surrounding London were said to be experiencing "some ripple effects" due to the capital's continued price growth.
Research from Nationwide also revealed that while house price increases in Northern Ireland are "astonishing", the economist pointed out that values could be falling as the market peaked earlier this year. Over the last 12 months, prices in the principality were said to have fallen from 54 per cent compared to 57.6 per cent. However, Ms Earley claimed that borrowers in the region could still face difficulties making secured loan repayments as recent rates of growth appear to be "unsustainable". "Average earnings in Northern Ireland are still lower than the UK average, suggesting that affordability is deteriorating fairly rapidly and that the market here could be more vulnerable than in other regions," she claimed.
Across Britain, Belfast, Aberdeen and Sunderland were the three cities outside of London reported to have seen the largest increase in property values, with Newcastle and Birmingham seeing the lowest growth at three per cent each. Meanwhile, Liverpool was the only place in Britain not to witness any increase at all in house prices.
The trend for slowed house price growth noted by Nationwide was also revealed in recent figures from Halifax. According to the Yorkshire-based financial provider, the average house price rose by 0.4 per cent over the course of June. However, with second quarter growth of two per cent, costs were said to be continuing to fall as rises of 4.2 and three per cent were recorded in the last three months of 2006 and the period between January and April respectively
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