Property Prices In ‘Significant Slowdown’
House price growth across Britain slowed over the course of May, it has been revealed.
In figures released by Communities and Local Government (CLG), the average property rose by 10.9 per cent during the month from the same time in 2006. However, in the 12 months leading up to April this growth was said to stand at 11.3 per cent. Meanwhile, growth between April and May was reported to be 0.7 per cent, down from the 1.1 per cent noted in corresponding months last year. Overall, the average home was said to cost some £211,056 during May, up from £209,454.
London was reported to have driven property increases across England, with prices up by 14.5 per cent. Meanwhile, the south-east and south-west of the country were said to have risen by 9.9 and 9.4 per cent during the month respectively. Alternatively, the lowest inflation growth was noted in the north-east and West Midlands. Homes in Scotland decreased to 15.5 per cent, with Welsh property falling by a tenth of a percentage point. Northern Ireland saw house price growth rate fall from 54.1 per cent to 51.9 per cent.
Commenting on the CLG’s statistics, David Stubbs, senior economist for the Royal Institution of Chartered Surveyors (Rics), said: “Today’s figures confirm that the UK housing market was still roaring ahead in the second quarter. However, these figures are released with a significant lag and house price inflation has recently started to see a significant slowdown.”
He claimed that the property sector is set for “further gradual slowing” over the coming months as the effect of recent interest rate rises by the Bank of England’s monetary policy committee (MPC) affects prospective buyers’ ability to make secured loan repayments. The Rics economist added that the possibility of the MPC increasing the base rate to six per cent by the end of 2007 is set to “dampen confidence and activity further”.
Howard Archer, chief UK and European economist for Global Insight, added that the findings indicate that “house prices are coming off the boil”. Mr Archer also claimed that the MPC is “more likely than not” to increase interest rates by the fourth quarter of the year.
The department’s study also indicated that annual property inflation for first-time buyers remained unchanged at 11.2 per cent during May. Prices between April and May were reported to have increased by 1.3 per cent in comparison to the same period in 2006, with the average prospective buyer now paying £162,055. Meanwhile, those who have already owned a property and are looking to take further steps on the housing ladder are said to have seen their annual inflation rate fall from 11.3 to 10.8 per cent as they pay an average of £235,095.
Earlier this month, a Rics study revealed that although property prices increased for the 20th consecutive month over June, the growth had almost halved in comparison to figures noted from May. Findings from the company also showed that enquiries from prospective first-time buyers fell at the fastest pace recorded since February as MPC rises were said to have curbed borrowers’ ability to make repayments on secured loans.
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