House price inflation falls back to 0.7%

The Housing Demand Index shows that price increases have been slowing down over the last three months mainly because of the quieter holiday season but it also reflecting a move back towards normality after clearly unsustainable rates of inflation over the last six months. House prices have risen by 12.6% since the beginning of 2002 and look set to rise by 20% this year, according to hometrack.

Price increases continued in all major regions, counties and cities this month with the strongest rises reported in South Yorkshire (1.9%), Nottinghamshire (1.8%), South Lincolnshire (1.8%) and Isle of Wight (1.7%). At the other end of the scale, only very slight increases were reported in the relatively expensive areas of Central and City of London (0.2%), Berkshire (0.2%), and Oxfordshire (0.3%).

House prices achieved as a percentage of asking price fell by 0.2% to 97.2% but this figure is still well above last November’s low of 94.7%. Average time to sell was 3.3 weeks, again, well below the 5-week average of November last year.

Commenting on the survey, John Wriglesworth, hometrack’s housing economist, 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 nineties style housing market recession. We are keeping our forecast of 20% house price inflation for this year and 8% for 2003.”