Average house prices are still increasing but at a slightly slower rate than in March, according to the latest figures from the Hometrack housing survey.
The monthly survey reveals in April house prices increased by 0.7%, which is a fall from the 0.8% growth seen in March, and is despite a 9.6% rise in sales volumes during the month.
But while it is only a small reduction, Hometrack says there are a number of other indicators which suggest higher interest rates and affordability pressures are starting to impact on the rate of growth.
Hometrack points out the primary drivers of house price growth over the last year have been a lack of supply in houses coming to the market and strong buyer confidence supporting high levels of demand.
And the findings of the survey suggest these factors have been strongest in the south of the country, where over the last year house prices in London increased by 14.2% while the south east has seen growth of 7.2% compared to a national increase of just 6.8%.
However, Richard Donnell, director of research at Hometrack, says aside from any external shock to demand the two main causes of slower house price growth are affordability pressure and an above average growth in the supply of homes for sale.
He says over the last two months research by Hometrack reveals the number of properties coming to the market has exceeded the increase in demand, and suggests the introduction of Home Information Packs (HIPs) may also impact supply levels.
Donnell points out agents have been suggesting potential vendors could save money by putting their home on the market before the 1 June deadline, which he says could mean people bringing forward their decision to sell, leading to a “worsening in the supply situation”.
In addition Hometrack suggests the three interest rate rises experienced since August last year are now beginning to bit, with affordability pressures meaning areas outside London are seeing a slowing the rate of house price growth.
Donnell says a further rate rise – which is expected by many in the industry at next month’s Monetary Policy Committee (MPC) meeting – will inevitably “put a squeeze” on would-be purchasers in the south.
But he warns there is a delicate balancing act to be had, in ensuring higher rates don’t have a further impact on those regions which are already seeing little in the way of price rises.
Donnell adds: “We expect both these factors to result in a slowdown in the rate of house price growth over the second half of the year.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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