House Prices Slow

House prices rose at their slowest for eighteen months during July as the demand for property was hit by another rise in interest rates.

The annual house price inflation rate dropped for the third consecutive month to 5.9%, a drop of 0.5%. Market changes have now reached London that had for the past year been the centre of house price growth.

London’s prices rose by 0.2% compared to March when they rose by l.8%. Only three regions prices rose in July those being London, the South East and Wales.

Cost housing in England and Wales rose by 0.1% making the average price of property £176,300.

It was obvious that at some point the increases in interest rates would have a bearing on housing demands. This has been quicker than thought due to the slower summer period.

The fact that many estate agents encouraged vendors to put their property on the market before HIPs came into effect has meant that more property came on to the market in an influx rather then gradually.

Land Registry said June bought a rise of only 0.4%. Others say there was a rise of 0.1% in July making it the slowest rise for over a year.

Surveyors say that house price inflation halved during June and new buyer enquiries dropped the fastest since February 2006.

It now takes an average of 6.5 weeks compared 5.8 weeks in May to sell a property and vendors are receiving 95.1% of the asking price.

It is likely that demand for property generally will be slower during the second half of the year due to interest rate increases.

House Price Index

The house price growth rose slightly in August but the annual rate continues to slow. Price increased 0.6% during August but annual rate fell to 9.6% from 9.9% in July. In August 2007 the average property cost £183,893 a rise of £16,177 since August 2006. The slowing results are because of less affordability, higher interest rates and inflation and lower expected house prices. There has recently been a reduction of new buyer enquiries a sure sign of the slowing of demand

The expected price growth of 2007 is expected come somewhere between five and eight percent.

The speculation of a six per cent interest rate seems likely after August’s Inflation Report.

If the trend continues it will have an effect on next years house price growth as well as the wider economy.