Another day, another house price index. And thus, our national obsession with watching the property market continues. We have good reason to come over all hawk-eye, though – earlier this week the International Monetary Fund warned housing was ‘vulnerable’.
It may comfort those with an eye on owning a place of their own, then, to know house prices rose just 0.1% in July, according to the latest Nationwide House Price Index. The smallest increase since April last year means the average home now costs £188,949.
Annual growth has also ticked down to 10.6% from 11.8% in June, although still a stratospheric leap above the flat yearly growth at the start of 2013. And, as the chart below shows, monthly price changes are pretty volatile.
It’s not the first sign the crazy growth is starting to cool: on Monday a Halifax survey showed buyer confidence was plunging as people become increasingly worried about high prices and the prospect of interest rate rises.
But Nationwide chief economist Robert Gardner said growth could return. ‘The modest rebound in mortgage approvals in June adds weight to the notion that the slowdown will prove temporary, though the underlying pace of demand remains unclear,’ he said.
‘With the labour market strengthening, mortgage rates expected to remain low and consumer confidence rising, activity is likely to recover in the months ahead.’
Aside from the point that interest rates will inevitably rise soon, making mortgages more costly, Gardner did also remind everyone of one crucial fact: in the long-term, prices depend on supply, and not enough homes are being built.
That will push them up until they hit a ceiling. As we may already be close to hitting that, even if growth rebounds in the short term, they can only keep climbing so far. Thankfully, a decent economy keeping demand for houses at a reasonable level will probably mean the bubble gently deflates, rather than bursting all over the recovery.