Autumn slowdown for housing market

The latest house price survey by the Nationwide Building Society reveals a slowing down of the market.

According to the survey, average house prices increased by 0.6% in the month of August, giving a fall in the annual rate of house price inflation to 9.6%, as compared with 9.9% in July.

This means that in August, a typical UK property cost an average of £183,898, a rise of £16,177 on August 2006.

Nationwide’s chief economist, Fionnuala Earley, attributes the survey’s findings to three main factors: weaker affordability; higher interest rates and inflation; lower house price expectations.

At the same time, Ms Earley expects house price growth for 2007 to fall between the building society’s forecast range of 5% and 8%.

Elsewhere, Capital Economics, the market analysis, expects the demand for mortgages to slow.

Recent figures from the Bank of England show mortgage approvals remaining steady in July, however, Capital Economics believes that mortgage demand has been slow to react to the monetary constraints that have emerged so far this year.

With building societies and banks now tightening their lending criteria and enquiries from new buyer steadily falling, the analyst expects weaker mortgage demand by the end of the year.

Another factor to be taken into account is the introduction of the Home Information Pack, which caused a surge of properties to come onto the market, ahead of the August deadline.

This produced a distortion in housing market data, which is expected to rebalance itself in early-autumn and could, according to Goldman Sachs, result in a sharp fall in housing market activity.

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