The inflated property market of London will soon see prices falling as the government and the Bank of England together take measures to slow down the fast-rising real estate prices in the City, the Royal Institution of Chartered Surveyors (RICS) announced Thursday.
Home prices in Britain's capital reportedly dropped to 31 points, the lowest since March 2013 after the Bank of England tightened lending rules in the city. Also, more than 10 percent of home price surveyors in London believe the costs will fall in the coming three months, acording to Bloomberg.
RICS added that demand for property in the city has also taken a backseat now after the lending curbs were imposed.
In June, British Finance Minister George Osborne declared that the cabinet was granting the bank of England more power to control the overheated London property market. He announced that the bank will regulate who can borrow how much depending on their income and the value of the property they intend on purchasing.
Osborne also announced a new set of planning rules that will limit the number of homes built on urban industrial sites to 200,000. He added that the government and the bank will work together to put the legislations into action, reports Reuters.
Of late, the BoE introduced some new curbs that have dampened the heated prices.
"The Bank of England's recent introduction of a ceiling on high loan to income lending and a 3% interest rate stress test is unlikely on its own to have an immediate influence on the market. However, rhetoric from key officials at the Bank, including Mark Carney, alongside the consequences of the introduction of the MMR are already slowing momentum, particularly in London," Simon Rubinsohn, chief economist at RICS said in a statement.
Just before the RICS report, Rightmove - a London-based property website - revealed that home prices in some cities have "virtually come to a standstill."
"The London market powers the rest of the UK but is starting to run out of steam," Miles Shipside, Rightmove's director and housing market analyst told The Guardian.
"While the legacy of rises in central London continues to ripple out to its better-value commuter belt, fuelling price increases in all southern regions, London itself is now marking time. It's an example to the rest of the country of what happens when affordability and common sense get stretched too far," he added.
