Following a period of record growth and booming prices, early indications suggest the property slowdown has started. Here we outline a few of the factors that look set to moderate the market during the rest of 2007:
1. House price growth slows down
Property prices are growing at a much slower rate than previous years. July figures published by the Nationwide show house price growth taking a downward turn, with average prices only moving by 0.1% on the previous month. This is the slowest pace of growth since April 2006. Nationwide's chief economist Fionnuala Earley said:
"After surprisingly picking up steam in June, house prices were almost unchanged in July, and their underlying trend growth resumed a downward path."
2. Mortgage approvals down
The British Bankers' Association suggest that compared to June 2006, mortgage approvals in June 2007 were down 11% by number, though up 3% by value.
However on the whole, mortgage lending remains record high - with the Council of Mortgage Lenders (CML) reporting gross mortgage lending figures of £34.2 billion in June.
3. Another interest rate rise expected
Interest rate rises have been cited as one of the main factors affecting house price growth. The Bank of England have raised interest rates five times over the past 12 months, pushing the current figure to 5.75%. Economists expect another rise - to 6% - will put the squeeze on housing activity even more. The CML's Director General Michael Coogan said:
"This will become much more evident in coming months as borrowers with fixed-rate mortgages come off their existing deal into a significantly higher interest rate environment."
4. Homes taking longer to sell
There are early indications of a buyer's market emerging, with less househunters out there and an increased supply from sellers. According to Hometrack, houses are taking longer to sell - from a recent low of 5.8 weeks in May to 6.5 weeks.
But housing supply will remain a problem for buyers in many regions of the UK and keep prices high.
5. Regional hotspots and slowdown areas
Top level figures can hide what's going on at a local level. While London prices continue to buck the trend, other areas have already been experiencing a slowdown.
Checking average prices and the latest local property sales will give a more accurate indication of property prices where you are. And read your regional property market guide for further guidance.
6. The HIPs effect
There was a rush for homeowners in England and Wales to put their homes on the market before June 1 in order to avoid having to produce a Home Information Pack, creating an un-seasonal supply of homes on the market.
Having been delayed at the 11th hour, now the ill-fated Packs are being phased in for homes of four or more bedrooms from August, which could dampen market confidence further.
Related articles
- Have your say
- Analysis for your region
- Buying & selling expenses
- The latest HIPs news
After surprisingly picking up steam in June, house prices were almost unchanged in July, and their underlying trend growth resumed a downward path.
Fionnaula Earley, Chief Economist, Nationwide
UK house prices: slower growth
- Nationwide
Average price: £184,270
Monthly change: +0.1%
- Halifax
Average price: £197,461
Monthly change: +0.4%
- Rightmove
Average asking price: £240,001
Monthly change: +0.3%
- Hometrack
Monthly change: +0.1%
Average property viewings to a sale: 11
Time taken to sell: 6.5 weeks
- Land Registry
Average price: £181,039
Monthly change: +0.4%
Mortgage lending figures
- Council of Mortgage Lenders
Gross mortgage lending: £34.2 billion
- British Bankers' Association
Number of mortgage approvals: -11% down on June 2006
See also
- House prices - view recent sales
- Average property prices - historical trends in your area
Your comments (2)
Archie Love (North Lanarkshire), on 20/01/2008 at 11:20
Personally as an Estate Agent we have in Scotland experienced a drop in viewers for properties on the books. Many of the first time buyers have decided to rent short term to save for deposits this has been as s result of the Northern Rock situation and the confidence of the borrower has definetly been dented. House prices continue to increase in value however the % growth in the last 6-9 months has been marginal. Early indications are that listings will be healthy in January and February and the telephones and web visits have been busy since the 7th of January. Another cut in interest rates and a solution to Northern Rock will I'm sure lead to increased house sales and more borrowers taking new mortgages.
Doreen (Teignbridge), on 20/12/2007 at 14:38
I think more houses will become available to rent over the next year as more sellers are renting rather than selling their houses. Probably be like this for about 18 months then there will be a rush to buy.......again pushing up the price of a house.
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