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Are house prices stabilising?

Are house prices stabilising?

Category: Mortgages

Updated: 05/08/2015
First Published: 05/08/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Around this time last year, there were growing concerns that house price inflation was reaching unsustainable levels, with some measures reporting annual increases of as much as 12%. Since then, however, things seem to have come off the boil, with price rises seeming far less extreme. So, are prices stabilising?

It certainly looks that way. Latest figures from Nationwide show that average house prices edged up by 0.4% in July, putting the price of a typical UK home at £195,621, in sharp contrast to last month's monthly drop of 0.2%. In turn, this pushes the annual rate of house price inflation to 3.5%, up from 3.3% in June, a measure that's broadly sustainable and well below the recent peak of 11.8% recorded in June 2014.

Since then, prices have certainly moderated, suggesting that house price growth could be stabilising. "After moderating over the past twelve months, there are tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%," said Robert Gardner, Nationwide's chief economist, adding that it would "bode well for a sustainable increase in housing market activity."

A positive market

A measure of house price growth is good news for all concerned, even if it may not seem like it for those looking to get on the property ladder. Small, incremental rises can mean those who own their home will be able to benefit from increased equity – which can help them to fund a future move – and moderately rising prices are a sign of a healthy economy, too.

Together with average wage growth picking up, moderate house price rises shouldn't pose too much concern for those trying to save up for a deposit, either, and as long as you're ruthless with your budget and save as much as you can, you'll hopefully be able to realise your dream of getting that all-important first-time buyer mortgage.

The only fly in the ointment could be if supply is unable to keep pace with increasing demand, noted Gardner. If that's the case, price rises may not be quite as moderate as predicted, so it's hoped that building activity will ramp up in the months to come to keep up with the expected rise in demand.

What next?

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