House price growth cools
House price growth cools
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Monday, 10, Apr 2006 12:33
House price growth slowed in February following a strong start to the new year, official figures reveal.
According to the latest index from the Office of the Deputy Prime Minister (ODPM), the average UK house price fell to £183,224 in February, down from £185,404 in January.
Annual price inflation also slowed to 3.6 per cent, down from 4.3 per cent in the previous month, with the slowdown caused by a significant cooling of house prices in England.
House price inflation in England fell 0.9 per cent between January and February, offsetting a 0.1 per cent increase in Wales, a one per cent rise in Scotland and strong growth in Northern Ireland, which reported a 3.3 per cent increase.
Howard Archer, chief UK economist at analyst Global Insight, believes the findings confirm his view that sustained price growth in 2006 is extremely unlikely.
"We remain dubious that house prices will be unable to sustain sharp gains for an extended period, despite the support provided by still relatively high employment and low interest rates," Mr Archer said.
"We believe that the upside for house prices over the longer term will be constrained by affordability constraints, elevated debt levels and a weaker labour market. First time buyers will be particularly squeezed."
Nevertheless, he suggested that despite the slowdown, continued price growth was likely to see interest rates remain on hold until August at the earliest.
"For now at least, the Bank of England will be very wary that a trimming of interest rates could excessively stimulate the housing market and risk send housing prices markedly higher," Mr Archer added.
Flats saw the sharpest price fall in February, with values down 4.6 per cent month-on-month.
Detached properties (1.2 per cent) and bungalows (1.1 per cent) also saw prices fall.
The official figures contrast with recent independent surveys from mortgage lenders and property firms, which have shown a steady upturn in price growth in both February and March.
Building society Nationwide reported that annual house price inflation rose to 5.3 per cent in March, while mortgage lender Halifax last week reported a 6.2 per cent year-on-year increase in March, following similar growth in February.
However, this discrepancy can at least partially be attributed to the fact that the ODPM survey is calculated according to mortgage completions rather than approvals and therefore tends to lag several months behind.