House price slump in London distorting national outlook

British house price inflation slowed to its weakest in June since the aftermath of the Brexit vote as political and economic worries continue to weigh, with flat sales expected for months to come.

The Royal Institution of Chartered Surveyors’ monthly house price index fell to +7 from +17 in May.

This was short of the consensus forecast for a balance of +15, but the pace of decline eased from a month earlier.

But declining house prices in central London were the main cause of the national slump, with prices in regions such as the West Midlands and North West of England, Northern Ireland and Wales still rising.

Agreed sales declined for a fourth successive month, with 5% more respondents seeing a fall in sales, while new buyer enquiries and new instructions both also fell.

The decline in new sales reflects a continued lack of stock coming on to the market and a more cautious stance from buyers over recent months, and while activity indicators now point to flat sales trend continuing over the coming months, the 12-month outlook balance slipped to its lowest level since the immediate aftermath of the Brexit referendum.

More than one in four surveyors identified domestic political uncertainty as the biggest factor explaining the current state of the market, with close to one in three highlighting Brexit as the most important factor.

“The latest results demonstrate the danger, however tempting, of talking about a single housing market across the country," said RICS' chief economist Simon Rubinsohn.

"RICS indicators particularly regarding the price trend are pointing towards an increasingly divergent picture. High end prime properties may be seeing prices slipping back but, for good or ill, prices are continuing to move higher in many other segments of the market. Indeed, the disaggregated data suggests that this will continue to be the case over the coming months."

Sam Tombs at Pantheon Macroeconomics' view was that activity in the housing market "is declining rapidly, with no immediate end in sight", also citing the intensifying squeeze on real wages and high rates of stamp duty as other factors depressing demand.

"With inflation on course to outpace wage growth for another year and Brexit negotiations likely to go down to the wire, the housing market likely will languish in its torpid state for some time, undermining households’ confidence and big-ticket purchases," he said.