‘Buyers will struggle to pay much more’: House price rises will be limited as costs bite, warns Rightmove

House price rises over the next few years will be muted as ‘buyers will struggle to pay much more’, property website Rightmove warned today.

Asking prices of newly-listed homes for sale flat-lined in the month to mid-July, the property website said, but home buyers are cautious on political uncertainty and wage growth falling behind inflation.

With the property market cooling, it forecast that house prices are no longer likely to rise above inflation. ‘High demand will continue to underpin prices, but we are seeing stretched affordability limiting the pace of rises, especially in the south of the country’, Rightmove’s Miles Shipside said.

Rightmove has forecast that house prices will no longer keep rising above inflation

Rightmove said that average asking prices for properties in England and Wales put up for sale by estate agents on its website increased by 0.1 per cent in July – a month that usually sees slight falls in prices.

This reversed the 0.4 per cent drop in monthly asking prices in June.

Asking prices are up £8,600 on average over the past year to £316,421, putting the annual rate of property inflation at 2.8 per cent – below the ONS’ CPI measure of inflation at 2.9 per cent.

The property market is still operating from a position of relative strength, Rightmove said, but big gains in price are now likely to tail off.

Mr Shipside said: ‘Despite the number of sold boards outside people’s properties nearly equalling the number of properties that are still up for sale, especially as you go further north, sellers should note the market remains very price sensitive as some properties are hitting their price ceiling.

‘Buyers, many of whom are sellers too, will struggle to afford to pay much more.’

Rightmove’s map shows where asking prices are rising the fastest and slowest across England and Wales. Annually, the West Midlands leads the pack and London brings up the rear

The past month has seen a turnaround in expectations for interest rates, with three members of the Bank of England’s monetary policy committee voting to raise the base rate from 0.25 per cent at the last meeting.

While any rate rises are expected to be slow and gradual, some economists are suggesting one could now come this year – something previously considered highly unlikely.

This has added to the nervousness among consumers and homeowners, with last week’s Royal Institution of Chartered Surveyors house price report suggesting that political uncertainty at home is weighing more heavily on the market than Brexit.

Monthly asking prices can be highly volatile and seasonal, Rightmove’s figures show

Mr Shipside said: ‘Wage growth is muted, there are signs that consumer credit is tightening, and at some point there will be the first rise in mortgage interest rates for a decade or more which will come as a shock to buyers who have either forgotten or have never experienced interest rates going up as well as down.

‘We can see now that price rises are muted despite high housing demand, indicating we have left the stage of the cycle where price rises exceed the rate of inflation.’

Asking prices have risen substantially over the past five years, Rightmove’s data shows, but it says this may now be tailing off

The number of sales agreed was up by 4.6 per cent in June 2017 compared to June 2016, and the number of sellers coming to market is also up on the same period a year ago, with a 7.6 per cent increase in fresh choice for buyers.

Monthly asking prices rose by the most in London, where they were up 1.1 per cent, with the West Midlands seeing the second biggest rise at 0.7 per cent.

Prices were flat in the South West and South East and fell by the most in the North East, at 1.3 per cent.

On an annual basis, asking prices are rising fastest in the West Midlands, up 6.1 per cent, East Midlands, up 4.9 per cent, and Yorkshire and the Humber, up 4.1 per cent.

The slowest annual growth is in London, where prices are up just 0.9 per cent, to an average of just over £641,000.

Rightmove’s data shows that first-time buyers are seeing the greatest annual asking price inflation, a trend that reflects the relative strength of that part of the market

The summer holiday season is also having a dampening effect on the housing market.

‘Prices are in the summer doldrums’, said Mr Shipside. ‘Sellers coming to market at this time of year have to price more keenly as the traditionally bubblier spring selling season is over and prospective buyers are distracted by their own summer holiday plans.’

Compared to the period around the referendum a year ago, more sellers have come to market and more buyers are buying, Rightmove said.

This could be dented by falling confidence, however, with a survey today by Deloitte showing British consumer confidence experienced its biggest fall in more than two years in the second quarter of this year, mirroring other recent measures of consumer sentiment.

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