UK house prices set to fall but 'not a fundamental shift' in the property market

Chartered surveyors are predicting house prices will soon drop in the UK, according to a poll, but the dip will only be temporary.

The Royal Institution of Chartered Surveyors (Rics) said its May residential market survey of members found 10% more believe house prices will fall than rise over the coming months, the first time a drop has been forecast by a majority since 2012.

"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, chief economist at Rics.

The fall in price, he said, is down to uncertainty in the property market about the forthcoming EU referendum on 23 June, and the drop-off in activity from buy-to-let investors, who had rushed to finish house purchases before the new tax year in April when they faced a stamp duty hike.

"Certainly, that's the story we are hearing from our members," Rubinsohn said. "There is not at this point a sense that a fundamental shift is taking place in the market."

Rics said house prices were already falling in London, where 35% more property professionals surveyed said values dropped in May than increased. Investment activity in London has stalled as property buyers await the outcome of the EU referendum. Prices are also significantly higher in London than elsewhere in the UK, pushing property beyond affordability for many aspiring first-time buyers in the city.

House prices rose by 1.5% quarter-on-quarter in the three months to the end of May 2016, according to the Halifax house price index. The average house price in the UK now stands at £213,472. On an annual basis, this was a 9.2% rise.

"Low interest rates, increasing employment and rising real earnings, continue to support housing demand," said Martin Ellis, Halifax housing economist. "The strength of demand, combined with very low supply, is causing house prices to rise at a brisk pace in quarterly and annual terms. Increasing affordability issues, caused by a sustained period of higher-than-earnings house price growth, should curb housing demand and result in some slowdown in house price growth as the year progresses."