House Price Growth at lowest level for 2014, though Average UK House Price reaches record high

Although property values reached record highs in November, house price growth fell to its lowest level this year as the property market continues to cool, according to Nationwide.

House prices rose by 8.5% over the 12 months to November, down from 9% in October, though the average price of a UK house grew by 0.3% to an all-time high of £189,388.

Nationwide remarked on the growing disparity between the dampening housing market and the wider economy, which is showing multiple signs of continuing to pick up, and while it forecasted that house price growth could continue to stutter, if rising employment levels and real wage increases transpired as expected then the housing market would pick up.

Robert Gardner, chief economist at Nationwide, said: ìForward looking indicators, such as new buyer enquiries point to further softness in the near-term. However, if the economy and the labour market remain in good shape and mortgage rates do not rise sharply, activity is likely to pick up in the quarters ahead.î

Since Juneís peak figure for house price growth of 11.8%, housing market activity has decelerated significantly with the Bank of Englandís tougher lending criteria – stress testing borrowersí under higher interest rates and limiting loans to 4.5 times a borrowerís income – thought to have stifled lending activity since.

This is highlighted by house price growth having fallen by 0.9% since June, with waning demand and general buyer caution increasing across the UK. Whilst wages continue to stagnate, fears of an interest rate hike will not moderate and this will be reflected in a lack of housing market activity.

Mr Gardner pointed out, somewhat surprisingly, that first-time buyers are the most common players in the housing market at present, potentially pointing to the enduring impact of Help to Buy on this group.

He stated: ìFirst-time buyers [are] continuing to represent an unusually high proportion of mortgage activity and with typical mortgage payments as a share of average income close to the long run average.î

ìHistorically low mortgage rates have helped to mitigate against the fact that house prices have been outstripping income growth.î

Earlier this week, Nationwide announced a £1bn decrease in mortgage lending over the first half of this year, with the nationís largest mortgage lender reeling from the after effects of the Mortgage Market Review.

Howard Archer, top economist at HIS Global Insight, revealed his expectation for house price growth of 5% for 2015, a more positive outlook than Halifax and Capital Economics, with the former predicting growth of 3-5% and the latter 4%.

He said: “With housing market activity appreciably off its early-2014 highs, we suspect house prices will generally rise at a much more sedate rate over the coming months compared to the peak double-digit annual growth rates seen earlier this year.”

With increasingly affordable supply flooding the market, and buyers continuing to express reluctance, combined with the impact of policymakersí on lending restrictions, it is plain to see why expertís forecasts for house price growth are so moderate.

Regardless, lenders are seeking to tempt buyers with the record low mortgage rates, as each seeks to undercut the other with their newest offering.

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