Housing slow down to materialise
House prices will edge ahead by just 1% next year as the long awaited slow down finally materialises, according to a property information group.
Hometrack said a combination of weaker market sentiment, stretched affordability levels and changes to mortgage lending would lead to a “pronounced slowdown” in house price growth and mortgage lending during 2008. But it added that while there would be price falls in some areas, it was not expecting a widespread drop in the value of property.
Richard Donnell, Hometrack’s director of research, said: “The greatest casualty of the current slowdown will be property transactions rather than house prices.
“While we expect the annual rate of house price inflation to slow to 1% by the end of 2008, transaction volumes are expected to fall by 17% over the year.
“Indeed, the next 12 to 18 months will be characterised by a general lack of housing for sale, which will provide a support to pricing, although this will result in much greater price volatility within local housing markets.”
The group is predicting that house price growth will be strongest in Scotland and Northern Ireland next year with these areas seeing gains of 3%, while prices will rise by 1.5% in London and the South East.
But at the other end of the scale prices could fall by 1.5% in Wales and the North East, while the group has pencilled in drops of 1% in Yorkshire and Humberside and 0.5% in the North West.
Hometrack said the mortgage market was facing its most uncertain outlook for many years as a combination of slowing mortgage demand and tightening credit standards by lenders was likely to lead to an 18% drop in net mortgage lending during 2008.
Mr Donnell said: “Housing market conditions have certainly turned over the last few months driven by affordability levels hitting a 15 year high and a weakening in market confidence.
“Affordability levels are stretched on most measures and a combination of rising incomes, slower house price growth and falling interest rates are expected to unwind affordability levels to a more sustainable level.”