The housing market in England & Wales is slowing down, both in terms of transactions and house price growth, according to the latest house price index from LSL Property Services and Acadata for May 2016.

Housing transactions are at their lowest level for the month of May since 2011 and the change in house prices at -0.4% is the largest fall in a month since November 2011. The reduction has been caused by purchasers bringing forward and now curtailing activity, in response to the 3% surcharge on stamp duty on second homes and investment property introduced in April 2016, as well as the uncertainty resulting from the impending Brexit referendum on June 23rd.

In May, house prices fell by -0.4%, or -£1,312, to an average £293,599, thus moving away from the milestone of £300,000, which is now some 2.2% above this new current average price.

Prices in London have also fallen below the £600,000 mark this month, having only reached this level in March. On an annual basis, the rate in May for England & Wales was 6.8%, down from the 7.7% of the previous month, although this still represents an increase in prices of £18,639 over the last 12 months.

Richard Sexton, director of e.surv chartered surveyors, said: “The housing market is holding its breath ahead of the EU referendum and after a rapid sprint at the start of the year. This 0.4% dip in average house prices in England & Wales since April will be a welcome respite for those hoping to get their first foot on the ladder. May’s correction in property values also follows on from a surge in activity earlier in the year, when second-home buyers and landlords brought forward their purchases to avoid the stamp duty surcharge. That tax hike and the Government’s anti-landlord policies are weighing down the market, but the main factor is short-term confidence ahead of the 23rd June referendum.

“The year-on-year growth in house prices has also slowed, decelerating to 6.8% in May, from 7.7% in April. With the Chancellor predicting that a Brexit from the EU would reduce property values by at least 10%, many buyers are holding off until after the uncertainly surrounding the referendum has been resolved.

“In London, house prices have slipped from last month’s record high, falling 0.3% (£1,769) month-on-month. This has pushed average property values in the capital back under the £600,000 mark, with the value of a typical home in the city falling to £598,421. However, this decline in property values has not spread across the entire capital. While house prices in the most expensive eleven boroughs have declined by an average of £4,000 (0.5%) from the previous month, values in the cheapest 11 boroughs continue to rise, jumping £3,000 (0.8%) month-on-month. But despite maintaining property values well above the rest of the UK, the demand for homes in London continues to grow. In the three months between February and April, sales of homes in London increased by 15%, compared to the same period last year. The majority of this upswing in sales came from flats. As landlords often prefer to provide flats to rent, these properties were a popular choice before the stamp duty surcharge came into force in April.

“With so much uncertainty in the UK economy, home sales have been subdued. While the total number of property sales did increase from the previous month, this month has seen the fewest May property sales since 2011, when the UK was still recovering from the recession. This uncertainty surrounding the EU referendum will not be resolved until 23rd June at the earliest. However, home sales for the first five months of the year are still 3% higher than the same period in 2015, due to the investment from landlords earlier in the year. This suggest that over the long-run, landlords won’t be put off by the reduction in mortgage tax relief, as many believe the sector will still be profitable despite the government’s attempts to drive them out of the market.

“However, not all parts of the market are struggling. There is cause for David Brent to celebrate, as house prise in Slough have surged by 23% year-on-year – more than any other area. The price of a terraced house in slough is now £63,000 more than it was a year ago. Property values in Slough have been boosted by the new Crossrail development, with a new terminus coming into operation in late 2018. The increase in tech jobs in the town has also helped to lift prices, with O2, Nintendo, BlackBerry and McAfee all located along what has been recently branded the ‘Silicon Alley’. As the fastest growing area in the UK, according to the Centre for Cities, with the number of businesses in the town rising by 29% over the last five years, uncertainty in other parts of England & Wales have not hindered growth in Slough.”