UK House Price Growth Decelerates but Supply Worsens

The rampant pace of house price growth in the UK slowed during April, according to the Royal Institute of Chartered Surveyors.

The Rics house price balance slumped to +54 in April, from +57 the previous month. This is calculated from surveys of chartered surveyors who are asked if property prices have been higher or lower than the previous month.

But Rics also highlighted a contraction in housing supply during April as nine of the twelve UK regions saw a drop in new sellers on the market.

There are concerns over the housing market as prices spiral. Halifax said in its monthly index for April that the average house price was 8.5% higher year before at £177,648, though it saw a second consecutive month-on-month decline of 0.2%.

This has led to talk of a housing bubble amid tight supply and higher demand fuelled by cheap mortgages thanks to ultra-low interest rates.

Financial regulators hope stricter mortgage guidelines imposed at the end of April, such as tougher affordability tests for borrowers, will put the brakes on riskier lending.

"House prices in general look set to remain firmly on the upward trend, although interestingly, there are some tentative signs that the price momentum in the London market may begin to slow in the second half of the year," said Simon Rubinsohn, chief economist at Rics.

"The critical issue for the market remains the lack of second hand supply with our numbers suggesting that the picture is, if anything, getting worse.

"It is too early to conclude whether this will undermine the positive trend in transactions volumes, but clearly the absence of properties to buy will ultimately be a factor in influencing the ability of people to move homes."

London house prices have rocketed in recent months. The Office for National Statistics (ONS) said the average price of a London home hit £458,000 in the year to February 2014, an 18.2% jump.

This is because of a cocktail of conditions, including weak supply, cheap mortgages, a recovering economy, a rising population, and waves of foreign investment in the property market.