House prices have 'neared their limit', says estate agency boss

The front of an expensive house in London

Property prices in the UK may be starting to slump, the boss of a leading estate agent has suggested.

Paul Smith, chief executive of Haart, says: “There is trouble in paradise as we are starting to see a big slump in buyer demand.”

Recent research by Haart reveals that while UK house prices were up 1% in April and 12% annually, hitting an average of £234,069, there has been a dramatic drop in demand from new buyers, which is down 46% in just one month.

Mr Smith says this fall in demand from new buyers “has been compounded by buy-to-let investors pulling out of the market following the new stamp duty surcharge, which came into effect on the 1 April”.

He adds: “We believe the nation has now neared the limit in terms of price rises. Our data is already showing a slowdown in both house price growth and transaction levels. In order to maintain healthy sales levels, sellers need to be much more realistic with their asking prices – properties are in danger of being over-valued and these homes will struggle to sell.”


HMRC figures also report housing slow down

Mr Smith’s analysis mirrors property transaction figures for April released by HM Revenue & Customers, which also report a drop in the number of residential property transactions – down by 45.2% between March and April 2016. It also found that April’s figure is 14.5% lower compared with the same month last year.

HMRC suggests this large rise in transactions for March 2016 followed by the big drop in April is linked to the introduction of the higher rates of stamp duty on additional properties in April 2016.


But adds that while April 2016 is lower than April 2015, the total for March and April 2016 is still substantially higher than the corresponding period last year.

Mr Smith says that despite the general fall off in new buy-to-let demand, “we are continuing to see high levels of investment from Europe – there is still a huge appetite to invest, despite the upcoming EU referendum”.

Despite his picture of the current property market in the short term, he says that, in the longer term, this will be “a slight blip” in an otherwise powerful property market.

Reacting to Mr Smith’s comments and to HMRC’s figures, Jeremy Leaf, a former RICS chairman and north London estate agent, says: “We may have reached the top or close to the top of the market – and certainly as far as prime central London property is concerned. However, it may be a little early to say we’ve reached the peak as regards to outer London, the Home Counties and the rest of the country.


“There’s always the danger of judging the market on one month’s figures, especially at a time when we are right in the middle of the EU referendum campaign which has caused considerable uncertainty.

“Clearly, many people – particularly buy-to-let investors and second home purchasers ¬– brought forward buying decisions to avoid paying extra stamp duty after 1 April, as evidenced by yesterday’s HMRC transaction numbers.

“In these circumstances, I would suggest we wait at least a month or two before forming a more definitive view about property prices. In any event, prospects for the medium term remain good, bearing in mind the strength of first-time buyer interest, longer-term demand and the low interest rate environment.”

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