House prices slow as affordability worsens

House price rises have slowed to the slowest pace since last May as interest rate hikes have worsened buyer affordability, says the latest RICS UK housing market survey.

House prices rose for the sixteenth consecutive month in February but the pace of increase slowed to the lowest since last May.

24.0% more Chartered Surveyors reported a rise than a fall in house prices, down from 28.0 % in January.

The pace of increases remains only just above the long run average of 21.6% as supply conditions remain tight boosted by a strong economy.

Three interest rate hikes have begun to weigh heavily on buyer affordability. 19% more chartered surveyors reported a fall than a rise in new buyer enquiries - down from 6% in January.

New buyer enquiries are likely to weaken further in the coming months as January interest rates takes effect on the market.

New instructions to sell property have gone nine months without a rise, the longest stretch in seven years.

Households remain under little pressure to sell with the stock of unsold property on surveyors' books falling to the lowest level since July 2004.

As a result, the ratio of completed sales compared to the stock of available property on the market rose to 47.0% – the tightest market conditions since June 2004.

Strong house price growth was once again seen in London and the South of England fuelled by an ever-booming financial services sector but there are signs of a modest slowdown.

In Scotland house prices increased at their fastest pace for several months while remaining robust in Northern Ireland.

However, the picture in other parts of the country is much weaker with small price falls reported in the East Midlands.

RICS spokesman Ian Perry, said: "The interest rate rises have started to worry would-be buyers with many concerned that they will be unable to meet mortgage repayments.

"Affordability for many will continue to decrease in the coming months as the January rise, and further rises take effect.

"Bullish market conditions still prevail in the South East, Scotland and Northern Ireland but this is at the same time that prices have stagnated in the Midlands.

“Market conditions remain tight but greater awareness of HIPs, in the run-up to their introduction, might push more property onto the market in the coming months increasing choice for the short term.”