London property boom is over - for now

London houses

Uncertainty surrounding May's general election will stifle an already slowing housing market, estate agency Winkworth has warned.

Since this year's first-quarter spike, the housing market has cooled, which Winkworth blames on the upcoming election, stricter lending requirements as a result of the Mortgage Market Review, and the impact of the strong pound on international buyers.

"Uncertainty in the run up to the election has been most apparent at the top end of the market as a result of concerns over a mansion tax and new measures impacting overseas buyers," the company says.

South East to benefit

Central London's slowdown is set to continue next year, with a 5% fall in house prices forecast for the first half, but an uptick at the second half could leave prices flat on 2014.

And while suburban London will also continue to slow as supply and demand is rebalanced, the South East will benefit from those in London relocating, with prices set to rise by 3% by the end of 2015.

And delays to an interest rate rise should help buoy the middle market by keeping mortgage costs low. Although activity is set to be flat this year, next year should see an uptick.

Rental prices should rise further thanks to improving employment and wage inflation, Winkworth added. 

This article was written for our sister website Money Observer