Too hot to handle? British property market shows signs of cooling

Wednesday, 30 July 2014

UK property prices have dropped for the first time this year, thanks to a combination of the hot weather and World Cup Fever. According to the latest figures, house prices fell in July by 0.8%, slowing the annual growth rate from 7.7% to 6.5%.

While a slowing market could mean bad news for homeowners planning a sale, it’s great news for first time buyers: and the British economy as a whole. Since the start of 2014, Britain’s rising house prices have left industry experts concerned at the prospect of another housing bubble. Mark Carney, the Governor of the Bank of England, even went as far as to warn the government that unchecked property prices could lead Britain back into recession.

The government has already implemented some measures to try to stem the growth of the market. In May, George Osborne announced that investors buying property in London through their companies would be subject to a 15% stamp duty charge in the hopes that this would deter people from purchasing “buy to leave” investment properties.

The Bank of England also announced stricter limits on the size of mortgages at the end of June. The company’s Financial Policy Committee explained that, from October, only 15% of new mortgages will be given at a rate of more than 4.5 times the income of the borrower. They also explained that lending will be subject to affordability checks, and hinted that the base rate of interest could be rising again soon.

Owning a property isn’t as simple as paying back the mortgage each month. Home-owners must also pay bills, home insurance costs, and maintenance fees. Stricter affordability checks will ensure that only people who can really afford a mortgage will be eligible.

Whether it's the government and Bank of England or the hot weather and World Cup that are responsible for the slowing market is very much up for debate. However, others believe the price drop could simply be a seasonal pattern: and that the housing market could be set to boom again at the end of the year. Rightmove, who were responsible for the research, admit that asking prices often fall in July, with a seasonal drop evident in six years out of the previous 10. With that in mind, it may only be a matter of time before house prices continue in their upward climb.



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