House price growth set to slow?

Latest figures from the Halifax show house prices rising by 1.7% to a seasonally adjusted average of £184,593 in October, giving a year-on-year increase of 8.6%. However, the mortgage bank says there have been indications of a weakening in activity at earlier stages of the house-buying process, suggesting that house price inflation may slow in the coming months.

The latest RICS survey, for example, shows signs of a slowdown in activity with virtually no change in sales between Q2 2006 and Q3 2006 whilst growth in new buyer enquiries slowed sharply in September compared to the previous month.

Meanwhile, the House Builders' Federation has also reported an annual fall in the numbers looking at new homes for the third time in four months.

The latest Halifax numbers come against a backdrop of sound economic fundamentals and a lower stock of properties available on the market putting upward pressure on house prices. Indeed, the UK economy continued to grow at slightly above its long-term average pace of 0.6% per quarter in Q3 with gross domestic product GDP increasing by an estimated 0.7% for the fourth successive quarter.

However, significantly higher utility bills and the increase in mortgage rates over recent months - both in fixed and variable rate products - are expected to constrain housing demand, causing the annual rate of house price inflation to ease over the coming months.

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2006-11-09 11:00:23 © Moneyextra.com