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Buyers expect 'doom and gloom'

83% of home buyers and sellers currently expect house prices to rise over the next twelve months, by an average of 5% according to propertyfinder.com's August index.  This would be around half the rate of house price inflation of the last 12 months...

Despite expectations of a slowdown, the research indicates a positive long term outlook for the housing market as a lack of supply continues to buoy prices.  46% of people attribute house price rises to a lack of homes coming onto the market, and a further 39% say that a lack of new homes being built is pushing up prices.

Warren Bright, chief executive of propertyfinder.com, commented: 'The housing market remains resilient although interest rates have had a cooling effect on price growth and the full impact is yet to feed through into data. 

Supply constrained

Changes in consumer attitudes are the first indicator of market conditions to come so we should expect house price inflation to continue to slow.  Nevertheless, supply is chronically constrained with too few properties coming onto the market and far too few being built.  Inevitably that will support prices over the longer term.'

 The MPC minutes published today agree that the housing market is experiencing a gentle slowing and is reacting to their medicine.

Warren Bright continued: 'The housing market is still in very good health so far.  It has moderated in a controlled way and is reacting just as the MPC would have hoped.  However, the rises so far will continue to affect the market for several months and any further hikes could be overkill.'

Most people (82%) naturally blame interest rates and unaffordable mortgages for a slowdown in house price growth.  People also have concerns about the high levels of household debt and some fear the economy overall could slow. 

Concerns exacerbated

At the last interest rate meeting, the MPC expressed concerns over the international credit markets and falls in equity prices.  Since the meeting these concerns can only have been exacerbated, indicating borrowers may be granted relief from a possible rate rise to 6.25% and perhaps even from the expected rise to 6%.

Warren Bright urged the MPC not to act further on interest rates: 'The housing market has been responding to interest rates for some time.  Price growth has calmed and mortgage volumes are down.  Now other areas of inflation are easing too - CPI and RPI have dropped below target more quickly than expected. 

“Furthermore, turmoil on the financial markets is tightening wholesale credit conditions - effectively a rate hike by another name. There is no justification to raise rates again in the immediate future.'