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House price growth shows slowdown

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  • 01/07/2000
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The price of the average house rose by £113 in May compared with £1,500 in April, leaving house pric...

The price of the average house rose by £113 in May compared with £1,500 in April, leaving house prices 16% higher than at the same time last year.

On a seasonally adjusted basis, however, these figures correspond to a monthly change of -0.4%, but commentators do not see this as a sign that the buyer sentiment is creating the climate for a market correction.

Halifax chief economist, Martin Ellis, said that the figures confirm a pattern of house price movements over the past few months indicating that the underlying pace of price growth is slowing. He believes the peak of the housing market has passed.

“The slowdown in both house price growth and activity levels appears to be largely in response to the four mortgage rate rises since last September and the abolition of Miras in April. These have added nearly £750 to the annual mortgage payments for a borrower with a £60,000 interest-only loan,” he said.

Alex Bannister, group economist at Nationwide, said: “We have seen a reduction in the May figures, but we do not really expect to see reductions month on month from here on. The annual growth rate will be relatively stable in the next few months at somewhere around 16%, and then decline a bit towards the end of the year, coming down to around 14%.

“We do not expect a meltdown because there is no good reason for the market to experience a dramatic turnaround. It is probably closer to the sort of levels that it should be, based on what people earn and how many people are employed. There is a need for a modest increase throughout the rest of the year.”

The National Association of Estate Agents (NAEA) is less confident. It reported that 66% of members responding to its April survey said demand outstripped supply compared with 77% in March. Optimism is also declining, with only 21% of estate agents in the South East reporting that the market was continuing to improve.

The Royal Institute of Chartered Surveyors said the housing market is healthy, but that price rises were returning to more sustainable levels.

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