London drives housing market despite July cool down

July’s heatwave cooled off the pace of price growth in the booming housing market, according to a new report.

Weaker housing demand in July led to an increase in prices by 0.3 percent month-on-month, down from 0.4 percent in both May and June, according to property analyst Hometrack’s figures.

London continues to be the “engine” for house price growth, with prices up by 0.7 percent month-on-month. Properties in the English capital are taking less than four weeks to sell, showing continued strong demand.

Despite the signs of a seasonal slowdown, house prices are 1.3 percent higher than they were a year ago after six straight months of increases, marking the strongest annual growth recorded in nearly three years.

Across England and Wales, 29 percent of postcodes registered price increases in July, falling back from 31 percent in June, which had been the biggest uplift recorded in almost six years.

Hometrack said that the strong momentum pushing up house prices seen in the first half of the year looks set to ease further as fewer new buyers enter the market over the summer. Depending on how far the market picks up again this autumn, 2013 could see the highest increase in house prices since the economic downturn.

Richard Donnell, director of research at Hometrack, said: “The momentum generated over the last six months looks set to moderate in the short term with less upward pressure on prices.

“The year has got off to a strong start. The level to which new buyers enter the market in the autumn will dictate whether 2013 turns out to be the year with the highest increase in house prices since the start of the downturn.”

The number of new buyers registering with estate agents rose by 1 percent in July, showing weaker growth than a 1.6 percent increase in June and a 2.5 percent uplift in May.

However, other indicators of the “health” of the market are still improving on the back of continued price rises and rising sales volumes. Sellers are achieving 94.4 percent of the asking price on average, taking the percentage achieved back to 2007 levels. Homes are taking just over eight weeks to sell, marking the shortest typical sales period in six years.

Prices increased more strongly during the first half of this year than many experts had predicted, boosted by Government schemes such as Funding for Lending, NewBuy and Help to Buy which have made mortgages much more accessible and have seen more first-time buyers flooding into the market, helping to get chains moving.

The Hometrack study asks estate agents and surveyors about achieved prices.