UK House Price Rise Begins To Slow Down

The UK property market has begun to show signs of gradually cooling down, with reports from Halifax stating that annual price growth has fallen back from the seven year high that was recorded in July.

The average house price of £186,270 was up 0.1 per cent in August and 9.7 per cent higher over the year, representing a significant slowdown on the 10.2 per cent increase recorded in July.

Martin Ellis, Halifax housing economist, believes that the market is being aided by an improvement in the supply of properties, with more houses coming on to the market alongside increasing numbers of newly built homes.

He stated: “Earnings growth that remains below consumer price inflation, and the prospect of an interest rate rise at some point over the coming months, are likely to curb demand.

“There are some signs of an improvement in housing supply, both in terms of more second hand properties coming on to the market and increased numbers of new homes. These trends if sustained, should help to improve the balance between supply and demand, contributing to an easing in the pace of house price growth.”

The signs that a potentially dangerous house price surge is relenting will reassure the Bank of England, with deputy governor Sir John Cunliffe recently saying that the housing market was “the blinking warning light on the Bank’s dashboard.”

The Bank

The Bank’s Financial Policy Committee stated in June that lenders are obliged to restrict mortgages exceeding 450 per cent of the borrower’s salary to 15 per cent of their lending as well as testing whether borrowers can afford their mortgage in the face of a three percent interest rate rise.

Mortgage approvals dipped back to 66,569 in the month of July, after picking up to 67,085 a  month previously, and buyers are also particularly wary of a first rate rise in seven years from the bank as we begin to recover from the recession.

The increased likelihood of an interest rate rise occurring in the coming weeks or months is also likely to have helped curb the previously insatiable demand for properties.

High House Prices

The high prices have been supported by the resurgent economic recovery, more promising job prospects, improved consumer confidence and relatively low mortgage rates.

Quarterly, house prices in the three months to August 2014 were 3 per cent higher than they were in the three months to May. although they were down from the eight year high that had been recorded in the previous month.

IHS Global Insight property expert Howard Archer, said that “The Halifax figures tie in with our view that house prices will keep on rising overall through the coming months but at a more restrained rate”.

He went on to say that “Buyer interest is likely to stay relatively healthy even if it has come off peak levels, as it should be supported by elevated consumer confidence, markedly rising employment, and still low mortgage interest rates (even if they start to rise by early 2015, they will still be very low compared to past norms). It is also being supported by the Help to Buy initiatives.”

Brad Shore is a keen property market researcher. He writes numerous articles for numerous clients such as AltaVista Property. His main interest is property investment but he also likes to write about stocks and shares.