August house price inflation proof of slowdown


According to the latest Halifax House Price Index, house prices inflation stood at 0.4% in August giving an annual rise of 11.4% over 12 months.

The average cost of a home in the UK now stands at £199,770, with prices having risen by 11.4% over a year.

August marked the third month in the four in which house prices rose by less than 0.5%.

Looking at the figures over a three month period, house prices increased by 1.6% between June and August compared with 4.5% between January and March.

Martin Ellis, Halifax chief economist, believes that while the market remains robust the level of inflation in August provides further evidence that growth has been slowing since the beginning of 2007.

Furthermore, he expects the five interest rate rises since last summer to cause the downward trend to continue over the remainder of the year.

Negative growth in real earnings during the first-half of 2007 and rising food prices are also putting pressure on household budgets, but high levels of employment and a housing shortage should continue to support some growth.

In addition, Capital Economics, the economic research agency, has reported a decline in recent months in both new buyer enquiries and the speed with which houses are selling. Added to which, the number of mortgages falling into arrears is increasing.

Capital Economics sees these factors, together with the current turbulence in the financial markets and stricter mortgage lending criteria, as likely to lead to a slowdown in the annual rate of house price inflation.

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