London House-Price Index Drops as Capital Leads Slowdown

By Scott Hamilton  

Photographer: Simon Dawson/Bloomberg

Grosvenor Crescent in the Westminster district of London.

A London house-price index fell to a four-year low in October, putting the capital at the forefront of a property slowdown in the wake of new rules on lending, according to the Royal Institution of Chartered Surveyors.
RICS said its house-price index for London dropped to minus 35, the lowest since October 2010, from minus 9 in September. A national index fell to 20 from 30, the lowest reading since May last year.
“The flatter trend in the market is partly a reflection of potential buyers becoming a little more cautious about making a purchase,” said Simon Rubinsohn, chief economist at RICS. Still, he said it “seems implausible that the dip in demand will result in very much of a decline in house prices.”
The report is the latest to capture the cooling in the housing market after the Bank of England introduced new rules to prevent a surge in risky mortgage lending. The central bank said yesterday that the near-term outlook for residential property has softened, citing in part “some restriction” in mortgage availability.
Out of the 12 regions tracked by RICS, London was the
only one to post a decline in values in October. The imbalance between demand and supply in the capital that boosted prices during 2013 “has largely gone into reverse,” RICS said. There is anecdotal evidence that speculation of a so-called mansion tax is having a “deleterious impact” at the top end of London’s market, it said.
Nationally, an index of new-buyer demand dropped to a six-year low, with the gauge for London plunging to the lowest since April 2008.