Newspaper article The Evening Standard (London, England)

House Prices Rising at the Slowest Rate in Nine Years; CITY BRIEFING

Newspaper article The Evening Standard (London, England)

House Prices Rising at the Slowest Rate in Nine Years; CITY BRIEFING

Article excerpt


HOMEOWNERS were given a sobering reminder of the slowdown in the property market today as Nationwide revealed that house price inflation is running at its lowest for almost nine years.

Despite a small increase during May, prices are a mere 5.5% higher than a year ago compared with 20%plus gains during the housing boom last summer. It is the slowest annual increase since August 1996.

Nationwide added, however, that the market remains on track for a soft landing rather than a crash.

The average price of a home rose by 0.3% to [pounds sterling]157,272 in May, buildthating on April's 0.9% gains. But price rises have averaged 0.2% a month over the past three months compared with 1.7% a year earlier.

Nationwide group economist Fionnuala Earley said: "The decision to leave interest rates on hold is clearly good news for the housing market where deteriorating affordability has held back firsttimebuyers and there [is] higher sensitivity to rates due to higher levels of household debt.

"Employment, income, interest rates and confidence are still supportive, but this does not suggest that the market will pick up again rapidly. Rather, it will continue on its gently cooling path this year."

However, Earley acknowledged there are risks to the building society's view that the market will achieve a soft landing.

"Some areas, where house prices have increased most rapidly, have experienced falls in prices from the peak," she said. "This is currently confined to London and the South-East, but there may also be localities in other parts of the country where there could also be modest falls in prices."

Most surveys suggest that the market, after cooling rapidly in the second half of last year, has stabilised as prospective buyers adjust to last year's flurry of interest-rate rises and vendors become more realistic about asking prices.

Mortgage approvals have picked up during the key spring season.

Ed STansfield, property economist at Capital Economics, said: "With the end of what is traditionally the market's busiest period of the year now in sight, activity levels are unlikely to improve sharply and downward pressure on house prices is likely to remain. …

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