It's too early yet to say whether or not this is the begining of the break in the run, but certainly for the time being the UK housing market has run out of steam. This is one to watch closely. One small detail of interest here for the connoiseur of 'panics, manias and crashes': it is often said that one of the prepcipitating factors which may burst a bubble is a tightening in the lending conditions, well this is what seems to be happening. And when lenders refuse to continue to fuel the run, well the run screaches to a halt.
UK house price growth slowed to zero this month, as nervous home buyers put off purchases because of uncertainty over Iraq, according to Hometrack, the residential property company.Its March survey of 4000 estate agents showed house price inflation fell to zero for the month, following a steady decline from a peak of 2 per cent last May.
Hometrack said the slowdown had been particularly marked in London and the south east, where price falls were widespread.The largest drops were registered in central London and the City, which fell 0.4 per cent; Berkshire, which slipped by 0.4 per cent; and Wiltshire and Surrey, where prices fell by 0.3 per cent. House prices continued to rise in the north. The highest increases were recorded in Cumbria, with 0.8 per cent; the East Riding of Yorkshire at 0.4 per cent; Mid Wales with 0.3 per cent; North Lincolnshire at 0.3 per cent and Dorset with 0.2 per cent.
Hometrack said it was taking an average of five weeks to sell a home, compared to 2.8 weeks recorded at the height of the boom last May. It said the average house price in the UK in March stood at £135,500. John Wrigglesworth, Hometrack's housing economist said house price stagnation looked "set to continue", led by the marked slowdown in activity in London and the south-east. "Despite low interest rates, high employment and growing income, the heat has definitely left the market," Mr Wriglesworth said. "Prospective home hunters are holding back from buying, not least due to worries and insecurity over the consequences of the war with Iraq. Fear dissuades people from moving and they stay put."Hometrack said that while mortgage repayments as a percentage of income were relatively low, most lenders were limiting mortgage offers to 3.5 times income. It said this appeared to be "putting a ceiling" on house price affordability, particularly at the top end of the market. Mr Wriglesworth said: "It appears that the prudence of lenders is helping put the brakes on house price rises. While they were happy to lend three times income when mortgage rates were 12 per cent ten years ago, they are reluctant to lend more than 3.5 times income, even though mortgage rates are currently lower than 5 per cent. This is effectively putting a ceiling on the level of house prices."
Source: Financial Times