London housing market 'in reverse', say experts

London house prices 'will fall this summer'

28 May

London's house-price bubble will begin to deflate in the next few months, according to the chief executive of the Nationwide building society.

Prices in the capital have been rising sharply in recent months, but a growing number of analysts suggest that values may now have peaked.

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“My view is that in London we will see a natural correction through the summer months," Graham Beale told Reuters. "That intense heat does seem to be dissipating a bit. We could be seeing the early signs of a natural correction.”

Mark Carney, the Governor of the Bank of England said recently that a housing bubble posed the greatest threat to the stability of the UK economy.

New mortgage rules introduced last month were intended to tighten lending criteria and reduce the risk that home-buyers would take on debts they could not afford to pay off. As a result, more applications are likely to be rejected, which in turn will restrict growth in house prices.

According to The Times, figures from the British Bankers’ Association "showed that mortgage approvals by Britain’s high street banks fell for the third month running in April which some economists attributed to tighter mortgage regulations".

Annual house price inflation for the UK slowed to 8 per cent in March from 9.2 per cent in February. In London, the figure fell more slowly, from 17.8 per cent in February to 17 per cent in March.