News Column

London property: No need for action to cool market, say estate agents

June 14, 2014

Rupert Jones



It is a sweltering day in the west London neighbourhood of Hammersmith, but for one estate agent the temperature of the housing market has been distinctly colder in recent weeks.

News this week that the government will give the Bank of England extra powers to deflate a housing bubble, allied to hints of an earlier than expected rise in interest rates from the Bank governor, will only make people more cautious.

"We noticed a cool breeze coming in about eight weeks ago," says Teresa Brewer, a partner at long-established Hammersmith estate agent Finlay Brewer. The local pounds 2m-plus market, centred on desirable areas such as Brook Green, seems to be "quietening down- people were less willing to pay the guide prices".

"We could see that people were being more cautious and slower to offer," chips in Paul Cosgrove, a director at the firm. "So there is a natural correction already - there doesn't need to be any action in our opinion," says Brewer.

The pair are explaining why they do not think the new powers being given to the Bank, or a surprise interest rate rise, were necessary or desirable.

It is the rapid pace of house price growth in the capital that has raised concerns about a property bubble and led to the moves by the Treasury to limit the amount people can borrow. Annual price growth in the borough of Hammersmith and Fulham is running at 16.4%, with an average price of pounds 708,000, compared with pounds 172,000 for the UK overall, according to the Land Registry, while Nationwide's most recent analysis put the figure at 21%. According to Mark Coden, partner at nearby estate agent Barnard Marcus, some pockets saw prices rise by up to 15% in the first three months of this year alone.

The Finlay Brewer pair say that at the pounds 2m-plus end of the market, buyers were already contending with talk about a mansion tax, 7% stamp duty, general election uncertainty and the knowledge, even before Bank governor Mark Carney's latest comments, that interest rates were probably going to rise within months. On top of that, there are strict rules on mortgage affordability that came into force in April, and what the industry regards as unhelpful headlines about an "overheating" market. "With all that, you've got your natural correction happening anyway," says Brewer.

Down the road at a well-known estate agent, an anonymous staff member backs up this diagnosis of the local market's temperature. Eighteen months ago, a one-bedroom property would have gone for up to pounds 450,000. A year later the same type of flat might have gone for up to pounds 600,000, but that is changing. He says: "Literally in the last two or three months the pedal has just come off, and we've been seeing things slow down a little bit. Prices are still going up but we're not getting as many instances of 'best and final offers' and sealed bids. It has definitely cooled a little. Buyers are becoming a bit more sensible."

He reckons an interest rate rise would probably have minimal impact. Many buyers earn "considerable amounts of money" in the City. As to the moves to cap home loans, "that will probably affect first-time buyers a lot more".



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Source: Guardian (UK)


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