Nationwide: House prices rise but slowdown expected

House prices swelled by 0.8% in August, but Nationwide said there are signs the housing market is finally starting to lose momentum.

Annual growth currently stands at 10%, bringing typical prices to £273,751.

Robert Gardner, chief economist at the building society, said: “We expect the market to slow further as pressure on household budgets intensifies in the coming quarters.

“Moreover, the Bank of England is widely expected to continue raising interest rates, which will also exert a cooling impact on the market if this feeds through to mortgage rates, which have already increased noticeably in recent months.”

Commentors agree that the steam is coming out of the market – even if this isn’t currently reflected in house price indicies.

Avinav Nigam, co-founder and chief operating officer of real estate technology platform IMMO, said: “Interest rate rises and talk of recession are pulling prices downwards. In recessionary times and times with higher interest rates, demand for buying properties tends to fall.

“On the ground, we suspect that actual selling prices are softening a little even if asking prices may not change by much. Vendors are having to accept a slight adjustment in pricing with deeper discounts than may have been the case just some months ago.

“However, we all still need a roof over our heads. Demand for housing does not fall in absolute terms. Demand shifts from buying to renting properties, which offers more flexibility.

“Unfortunately, the shortage of supply of both properties for ownership and for rent continues. For this reason, the slowdown in growth should not be taken as an indicator of a major crash to follow. It just means that there’s a supply demand gap that will shift from buying towards renting.

“As a result, rental prices have grown by almost 10% in the last quarter vs year ago, creating the need for quality rental housing at affordable prices.”

Nationwide responded to Ofgem’s recent an announcement of an 80% increase in the energy price cap from October.

The building society calculated that, as things stand, from October average bills for D-rated properties (the most common type) are set to rise by just over £1,250 a year, even after taking account of the government’s £400 discount.

Increases in energy costs come at a time when mortgage interest rates are also rising, as the average rate on new 2-year fixed rate mortgages to 85% is currently 2% higher than two years ago, while for 5-year fixes it’s 1.5% higher than five years ago.

According to Nationwide the government will have to act to mitigate this cost of living crisis.

Robert Gardner added: “With household budgets coming under substantial pressure, the government is likely to increase support.

“But, as well as addressing the rising cost of energy bills, improving the energy efficiency of the housing stock could play a crucial role.

“Incentivising improvement measures, such as loft and cavity wall insulation and solar PV installations, could help limit bill increases and assist the UK towards its carbon emissions targets.”

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