Property sales and demand fall 'sharply' in London

Demand for new homes in the U.K. fell slightly in July for the first time since the start of 2013, with figures falling fastest in London, where purchases and buyer enquiries plummeted at the fastest rate since 2008, new data shows.

House prices over the next year are now expected to rise faster outside of London rather than in it, where affordability is less stretched according to the Royal Institution of Chartered Surveyors residential market survey.

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The supply of new properties coming onto the U.K. market increased for the second consecutive month in July's survey, meaning house price growth looks to be moderating.

Policy initiatives adopted by the Bank of England in recent months along heightened expectations surrounding a turn in the interest rate cycle has clearly impacted sentiment in the market, RICS said.

"I think he (Governor of the Bank of England, Mark Carney) can take a lot of credit for this," senior economist at RICS, Joshua Miller told CNBC, adding the bank had "gone out of their way" to engineer a change in psychology towards the housing market in the U.K.

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"The shift in the mood music amongst potential buyers in the London market has been particularly pronounced but that is in a sense consistent with the move to a more sustainable market in the capital," RICS added.

While some 10 percent of respondents to the survey reported an increase in London house prices, this was down from 30 percent seen in the previous month.

U.K. house prices are projected to rise by 2.6 percent on a 12 month view, down from around 4 percent at the start of the year.

By CNBC's Jenny Cosgrave: Follow her on Twitter @jenny_cosgrave