LONDON (Reuters) - A closely watched gauge of British house prices neared a five-year low, and sales look set to remain subdued in the months to come as fewer home-owners put their properties on the market.
The Royal Institution of Chartered Surveyors (RICS) said on Thursday that its house price index fell to zero in February from a downwardly revised +7 the month before. This was a bigger drop than forecast by any economist polled by Reuters and matched November’s reading, the lowest since March 2013.
Britain’s economy slowed last year and appears set for relatively subdued growth this year, as consumers’ disposable income remains under pressure from a jump in inflation triggered by the fall in the pound after June 2016’s Brexit vote.
RICS said the headline figure continued to mask wide regional variations. Prices fell in London, southeastern and eastern England, but rose solidly in most of the rest of the United Kingdom.
London prices have been hurt by concerns about prospects for the financial services sector after Britain leaves the EU in March 2019, as well as tax changes that have increased the cost of buying expensive property, especially as a second home.
On Wednesday, major mortgage lender Halifax said UK prices in the three months to February were 1.8 percent higher than a year before, the smallest rise in nearly five years.
However, RICS said its members expected both house prices and rents to rise by 15 percent over the next five years.
“The longer-term national house price indicator has begun to creep upwards once again in recent months despite the current somewhat mixed climate,” RICS economist Simon Rubinsohn said.
Sales, new buyer enquiries and new sale instructions all fell in February. The last of these dropped by the most since July 2016, pushing the number of properties being offered for sale by the average estate agent to a record low, RICS said.
Prime Minister Theresa May called on homebuilders on Monday to “do their duty” and build new houses more quickly to meet demand, launching a draft policy on planning laws to try to ease Britain’s housing shortage.
RICS said its members thought putting more pressure on property developers and town planners was unlikely to be enough.
May has made tackling a long-term housing shortage one of her top priorities, to show voters that her government can deliver domestic reforms at the same time as negotiating the country’s exit from the EU.
Around 217,000 new homes were built in 2017, compared with a government goal of 300,000.
Reporting by David Milliken, editing by Andy Bruce