House prices in the UK rose in July, despite consensus among economists that the house price boom is over. Figures released by the Halifax show a small increase in house prices of 0.3%, which reverses the small decline experienced in June.
However, overall house prices have remained unchanged for the last four months, and the general view is that the market should remain steady for the rest of the year.
Bernard Clarke, communi-cations manager at the CML, said: “We believe that we are bound for a soft landing and have every reason to hope that, without any unforeseeable shocks, the boom and bust cycle may have finally been broken.”
The CML has revised its forecast for the housing market, predicting that the rate of increase in house prices will drop from 10% at the end of this year to 6% in 2001 and 5% in 2002.
Martin Ellis, group economist at the Halifax, said: “We expect to see gentle rises for the rest of the year. The economy seems quite strong and total activity is growing. But consumer demand is not as strong as last year because interest rates are up and mortgage tax relief was abolished earlier this year.”
Despite July’s small increase, house price inflation fell to 8%, from 9.2% in June, and 16% in January this year.
Research from the Royal Institution of Chartered Surveyors (RICS) confirms the cool down in house prices, showing that for the three months to the end of June, the net balance of chartered surveyors across the country who reported a price rise was only 5% – the lowest number since 1998. Its research also shows that the overall slowdown in price inflation is disguising large regional variations. For example, a net balance of 14% of surveyors in London witnessed falls in prices, yet in the North of England the net balance of those reporting rises grew from 23% in May to 39%.
The CML believes that house prices in London have slowed in the second quarter of the year as some first-time buyers struggle with affordability. But first-time buyers in other parts of the country are still benefiting from a competitive mortgage market and low interest rates.
Ellis, however, believes that the rest of the country will soon follow the example of the south east. “Housing cycles are driven by what happens in London and the south east. A slowing of London house prices will result in a slow down in the rest of the country,” he said.