|
|
| THURSDAY 2ND JUNE 2005 |
 LOWEST
ANNUAL HOUSE PRICE RISES SINCE 1996
House prices in May increased by just 0.3%, down from 0.9%
in the previous month said Nationwide today. This continues
the trend witnessed since the start of the year and is consistent
with the view that the market is cooling gradually.
The annual rate of house price inflation fell back to 5.5%
in May from 7% in the previous month. This is the lowest annual
rate of house price inflation since August 1996.
Prices increased by an average of 0.2% per month in the
last 3 months – a very different picture to this time
last year when the average increase was 1.7%. The price of
a typical property increased by £8,252 in the 12 months
to May and now stands at £157,272.
Fionnuala Earley, Nationwide's group economist, said: "The
biggest change in sentiment during the month centres on interest
rates. From the earlier expectation that the MPC would increase
rates in response to underlying inflationary pressures, the
consensus is now that rates have peaked."
"Another month of dismal retail sales data led to worries
that the consumer, who has for so long supported the economy,
is now retrenching and that this could lead to a sharper
drop in economic activity than previously expected. The Bank
of England adjusted its forecast for economic growth down,
but the underlying economic background remains generally
favourable and all of the major housing market drivers remain
firm."
"The decision to leave interest rates on hold is clearly
good news for the housing market where deteriorating affordability
has held first time buyers back and there are worries about
higher sensitivity to interest rates due to higher levels
of household debt."
"Employment, income, interest rates and confidence
are still supportive, but this does not suggest that the
market will pick up again rapidly, rather that it will continue
on its gently cooling path this year."
"The impact on house prices comes primarily from lower
levels of activity. Estate agents have reported falling sales
to stock ratios since February last year. This reflects stickiness
of selling prices and, more recently, the reluctance of buyers
to meet these. The relatively buoyant economic conditions
mean that sellers are still under little pressure to reduce
their prices. Buyers, on the other hand, affected by deteriorated
affordability and changing sentiment, are not willing to
stretch themselves further to meet them."
"We anticipate that this will unwind, but gradually,
as sellers adjust their own expectations, rather than as
a result of forced or panic sales. Mortgage approvals, which
provide a good leading indicator of transaction levels, are
significantly lower than this time last year but have shown
some recovery since the start of 2005 and this may signal
the start of some unwinding."
|
|
|
