Residential property prices in the UK saw modest growth in May but central London experienced a fall in values, according to the latest market survey report.
UK house prices are now expected to experience a short term drop for the first time since 2012, according to the monthly report from the Royal Institution of Chartered Surveyors (RICS).
House prices in central London are already falling, according to the survey with 35% more property professionals reporting that prices had fallen rather than risen over the past month.
While prices are continuing to climb modestly across the rest of the UK, this trend looks set to fade, with 10% more respondents predicting that prices would fall rather than rise over the coming three months.
This is the first time that a fall in prices has been predicted since 2012. London and East Anglia are expected to be worst hit with 43% and 33% of respondents saying that prices will fall over the next quarter.
‘Sadly, for the many young people looking to enter the property market, it is unlikely that we are seeing the emergence of a more affordable market,’ said Simon Rubinsohn, RICS chief economist.
‘Instead, it appears to me that what we are looking at is a short term drop caused by the uncertainty resulting from the EU referendum coupled by a slowdown following the rush to get into the market ahead of the tax change on the purchase of investment properties,’ he explained.
‘Certainly, that’s the story we are hearing from our members. There is not at this point a sense that a fundamental shift is taking place in the market,’ he added.
The market report also shows that buyer demand fell across the UK for the second consecutive month and at the fastest pace since 2008, with 33% more property professionals saying that demand decreased last month.
The survey revealed that in the longer term, while house prices are thought likely to regain momentum, rents look set to outpace them, with UK rents predicted to increase by 4.7% year on year for the next five years, compared to house price increases of 4.1%.
The number of agreed sales also fell for the second consecutive month with a net balance of 22% of respondents reporting a fall rather than a rise in activity.
