Nationwide has released its House Price Index for August, and while house price growth is still evident, it is at a slightly slower pace than previously.
House prices soared in June despite Brexit uncertainty after the General Election.
The figures were released this morning, and Head of Lending at Mortgage Advice Bureau, Brian Murphy, has explained what he thinks the cool down in prices means for homeowners and the wider economy.
He said: “The figures suggest that house price growth is still evident, albeit at a slightly slower pace than previously, with annual house price growth at 2.1 per cent in August, and a slight month on month decrease (0.1 per cent).
“Contrasting these figures with the same time last year, we can see that in August 2016, annual house price growth was at 5.6 per cent, which could suggest that while annual property value increases this year are still in positive territory, the market is cooling slightly.
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“Having said that, with annual growth remaining around the 2 per cent figure, the market is operating absolutely in line with market forecasts for 2017.”
Brian said there are a number of factors which could be responsible for current market conditions.
He said: “Ongoing consumer demand and continuing lack of supply are perhaps maintaining prices at 10 per cent above the 2007 peak, whilst lack of wage growth is having an effect on mortgage affordability, meaning that those coming to the market currently do have an upper limit in terms of borrowing, which of course suggests that vendors have to be realistic about pricing in order to sell.
“It’s also possible that the continued lack of buy to let investors, due to income tax and SDLT changes, is having an effect on values, albeit that the impact of this group not being as active as they have been in recent years has perhaps taken some time to ripple through and have a tangible impact on values.”
But a slight cooling in pricing may not be a bad thing, according to the property expert.
A sustainable market is what first time buyers need to be able to get on the ladder and to ensure the wider economy continues to function.
Brian added: “If pricing is now beginning to become more aligned with affordability, together with record low interest rates and a raft of competitively priced lower deposit mortgages available, hopefully these factors will enable those who are currently hoping to buy their first home to transact, as well as providing the opportunity for second steppers to move which would have a positive impact on the market.
“Given that house prices are now so far above the peak of a decade ago, a slight cooling in prices is perhaps no bad thing if it means that we don’t face another house price bubble ad the inevitable house price correction – with its wider economic implications – that would follow.”
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