Tougher mortgage rules 'slow sales'
House sales are now taking up to a month longer to go through than at the start of the year as lenders grow more cautious, surveyors have reported.
The Royal Institution of Chartered Surveyors (Rics) said that stricter rules around the way that lenders can hand out mortgages and shortages of conveyancers and other skilled staff as the market has generally picked up over the last year have been factors behind the delays.
In its report for August, Rics said it is also seeing growing signs of the London housing market moving towards a more sustainable footing as the number of homes coming up for sale is matching demand from would-be buyers better than previously. This more even balance is helping to take the edge of strong price gains in the capital.
Rics said that people's concern over a potential rise in interest rates, which would push up borrowing costs, is also leading the UK housing market to reach a "plateau".
It said that an overall balance of 20% of surveyors reported that the number of agreed house sales fell rather than rose in August, marking the first dip seen since September 2012.
Toughened mortgage lending rules came into force at the end of April under the Mortgage Market Review (MMR), which force lenders to spend more time checking evidence from mortgage applicants in order to confirm what they say about their spending habits.
Lenders also have to apply "stress tests" to check that a borrower would still find their mortgage affordable if the interest rate rises.
In its report, Rics said evidence from its members suggests the MMR has had a double impact on consumers in that it has restricted the amount of finance some people are able to get as well as lengthening the time it takes for a sale to go through.
The report said: "Feedback suggests that relative to the beginning of the year, transaction times appear to have lengthened by around 2-4 weeks.
"While lender caution is reported to be the primary cause of these delays, shortages of conveyancers and other skilled staff are also cited as issues."
Inquiries from potential buyers fell in August for the second month in a row, but Rics said that a continued lack of homes to choose from is helping to support "firm" price growth, with 40% of surveyors across the country reporting prices increasing rather than falling over the month.
The London market, which saw particularly strong activity at the start of the year, is continuing to show signs of cooling off, while elsewhere there is greater resilience, reflecting the fact that the housing market recovery is only just taking hold in some places and the affordability of a home is less stretched than in the capital, Rics said.
A balance of 9% of surveyors in London reported prices increasing rather than falling during August. Rics said that although this still indicates "mild price growth" taking place, it represents a significant turnaround from the start of the year when the vast majority of London surveyors were reporting rising property values.
London has been the region with the most chronic lack of supply of homes for potential buyers to choose from, but there are now signs of more properties coming up for sale, helping to make the market there "more sustainable", Rics said.
The capital is now showing the most muted price growth "by far" on a regional basis, the report said. East Anglia and Northern Ireland saw the strongest upward momentum in prices during August, with 70% and 68% of surveyors respectively in these regions reporting uplifts. In Scotland, 41% of surveyors reported prices increasing rather than drifting downwards, while in Wales this figure was 40%.
Surveyors expect prices to increase by around 2.3% over the next year, a figure which is down from 3.7% at the start of 2014. Surveyors in Northern Ireland now appear the most optimistic, predicting a price gain of 3.9% over the next 12 months.
Simon Rubinsohn, Rics chief economist, said: "Some of the momentum has come out of the housing market of late, reflecting in part concerns over a likely rise in the cost of borrowing in the not to distant future.
"However, we are also being told that the implementation of the recommendations of the MMR is taking its toll on activity, slowing the process by, on average, up to a month."