The rate of house price growth continued to show signs of steadying across the major indices in August, although strong figures for asking prices from Rightmove kept annualised growth at 11.1 per cent for the year from August 2006 (an increase of 0.5 per cent on July’s growth).
The annualised rate of growth recovered from a dramatic fall attributed to Rightmove’s asking price figures in July, with the average property value again jumping by over £20,000 in the year to August.
However, this did not prevent overall UK house prices showing a continued monthly slowdown, with average values up less than £1,000 for the second month running.
The dents to consumer confidence experienced during summer 2007 have fuelled a continued stabilisation in house prices in August.
With the launch of Home Information Packs (HIPs) coinciding with a traditionally slow period for the market and unprecedented bad summer weather, a slight downturn is now widely anticipated.
While this offers some good news to first-time buyers, along with the recent drop in inflation and a stabilisation in interest rates, there is little risk of any significant downturn in prices.
Buy-to-let investors with a medium to long-term view should therefore remain confident of a strong rental market with almost all market analysts reporting robust rental growth. RICS have specifically cited apartments as the most likely winner in the face of growing rents over the next twelve months.
House prices gaining modestly over the summer
The average house price in August 2007, taken from the average price provided by all five major indices was £213,710, up marginally from £213,093 in July. This shows an increase of just £617 in the value of the average property in the last month, and an increase of £20,916 in the twelve months from August 2006, when the average price of a home was £192,794.
Stuart Law, chief executive of Assetz, said: “The summer slowdown revealed by the UK’s five major indices in August was something we had forecast in last month’s House Price Watch, and should not be a cause for alarm in the market, even with a slight downturn in the rate of house price growth now a possibility in the near future. There remains little evidence that we are any closer to a solution to the housing shortage in this country. This will ensure a continued strong demand, keeping house prices at their current high levels.
“Even the most informed commentators are still unclear as to whether the ‘credit crunch’ that we have seen causing market volatility in recent weeks will lead to a significant change in interest rates.
“In the UK, it is likely that the Bank of England will react to this period of oncoming global financial uncertainty and drop interest rates back from the current 5.75 per cent down to 5.25 per cent by the New Year. We are now at the peak of the current cycle of UK base rates and this view is strengthened by the current market turmoil. Stock market investors have lost significant capital over the last few weeks and yet again this will drive them back into the more steadfast property market.
“With this potential stabilisation and the recent drop in inflation, we should also begin to see in an increase in consumer confidence, which will bring more buyers to the market and keep house prices growing at or near the steady level we are currently experiencing. Although a little early for next-year forecasts we are currently pencilling in 5-7 per cent growth for 2008, as levels for 2007 are now likely to exceed this year’s forecast of 7-8 per cent.”
