LONDON House price growth eased in May to its lowest in more than a year and rising interest rates cut surveyors' confidence in future prices to its weakest in more than 1-1/2 years, a survey shows.
The Royal Institution of Chartered Surveyors said its house prices balance fell to +23.9 in the three months to May from a downwardly revised +28.5 in April. That was the lowest reading since April 2006. Analysts had predicted a reading of +25.5.
Other housing market indicators such as home loan approvals and lending figures and a recent survey by Halifax have also pointed to a cooling housing market as four interest rate rises have made it dearer to move up or get onto the property ladder.
The Bank of England lifted borrowing costs to 5.5 percent last month, a six-year high, and has warned it will have to tighten again soon if price pressures remain elevated. Many analysts see rates at 6 percent by the end of this year.
RICS said its members were concerned about the impact of higher interest rates on the market. Surveyors' confidence in house prices three months ahead fell in May for the seventh successive month to the lowest since August 2005.
The outlook for future sales improved slightly but remained below its long-run average.
"With interest rates expected to rise even higher and some home owners fearing the end of fixed rate deals, affordability conditions are set to worsen across the board and will herald a cooling market," said RICS spokesman Jeremy Leaf.
The ratio of sales to stock, regarded by some economists as a more reliable indicator of housing market demand, fell for the second month in a row to 40.9 in May from 43.3 in April.
Still, enquiries from new buyers steadied in May, after several months of declines, suggesting underlying demand remains good, RICS said.
And the number of homes being put up for sale shot up in May at the fastest rate in the survey's three-decade history.
RICS said that was probably due to people wanting to avoid new regulations on homesellers that were due to come into effect this month, but have now been delayed until August 1.