UK house price rise slows to more 'realistic pace'

The rapid rise in UK house prices has slowed to a more realistic pace according to the latest report from market analysts Hometrack.

The analysts found that the price of the average house in the UK rose by 0.7% in August, which Hometrack attributed to a "reality check" in the market. Previously in May there was a staggering one-month rise of 2.6%.

Despite the radical reduction in the level of house price rises, housing market analysts are not expecting a sudden crash in the market as was seen in the early 1990s. The level of demand for housing continues to outstrip the rate of supply and although this gap has closed slightly desirable properties are still much sought after.

Hometrack’s Housing Economist John Wriglesworth said: “The housing market has had a reality check and price rises have slowed down to more sustainable rates. While the slowdown has been marked over recent months, this is partly seasonal. Continuing record low mortgage rates, rising incomes, and a shortage of supply point to further price rises, albeit at a more modest rate. The boom continues and I am confident that there will be no 90s-style housing market recession. We are keeping our forecast of 20% house price inflation for this year and 8% for 2003.”

The current low mortgage rate is expected to continue fuelling the demand for housing as purchasers avail of the cheap lending rate.

Analysts say that the seasonal fall in house price growth, traditionally quieter over the summer months, may reflect a return to normality after what have been described as a period of unsustainable house price rises in the past few months.

Housing sector analysts continue to predict a year-end average house price rise of 20%, which puts the rise in prices at eight times that of retail inflation in the same period.

Analysts predict a more modest growth in house prices over the next few months.

(SP)