London house prices fall for first time in over 3 years

File photo of a couple checking out property for sale in London. The Royal Institution of Chartered Surveyors said prices in London fell for the first time since January 2011, ending the longest unbroken run of increases in more than 20 years.

LONDON: London house prices fell last month for the first time in more than three years, and prices nationwide showed their smallest increase in 15 months, a major house price survey showed on Thursday.

The Royal Institution of Chartered Surveyors said prices in London fell for the first time since January 2011, ending the longest unbroken run of increases in more than 20 years.

The signs of a cooling in Britain's housing market are likely to be welcomed by the Bank of England, which earlier this year warned that Britain's economic recovery would be at risk if house prices continued to rise far faster than wages.

The RICS national balance slid to +30 for September from a downwardly revised +39 in August, a much bigger drop than the easing to +38 forecast by economists in a Reuters poll and its lowest level since June 2013.

"Fading price momentum is more than just a London story," RICS said.

The RICS data is based on its members' views on whether house prices in particular regions have risen or fallen in the past three months.

Last week data from mortgage lender Nationwide, which is typically more volatile than the RICS index, showed the first month-on-month fall in house prices across Britain since April 2013. Rival lender Halifax said on Wednesday that although prices rose more rapidly than expected in September, growth looks likely to moderate going into next year. 

British house prices are around 10% higher than a year ago, and house prices in London have risen by more than twice that.

But RICS said its members did not expect this type of price rise to continue. Over the next 12 months, they predict prices will rise 1 percent in London and 2 percent in Britain as a whole. Over the next five years, it expects average annual price growth of just under 5 percent.

RICS chief economist Simon Rubinsohn said that the slowdown in the housing market was "a healthy development".

"Part of this is down to the Bank of England becoming more vocal about the risks, part of this is down to affordability, part of this is down to the new mortgage rules and part of this is down to expectations of higher interest rates," he said.

Earlier this year, the Bank said that further debt-fuelled rises in house prices could turn into the biggest domestic threat to Britain's economic recovery, and urged banks to avoid issuing mortgages worth more than 4.5 times a house buyer's income.

Another regulator, the Financial Conduct Authority, has told lenders to make closer checks on whether new borrowers can afford mortgage repayments. Most economists expect the Bank to start to raise rates early next year.- Reuters