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IPM Property News
House price growth is fastest since
early 2005
Source: www.themovechannel.com, September 2006
House price inflation continued to increase in August, but the rate increase
will signal caution said Nationwide. It was the third consecutive month that
has seen an increase in annual house price inflation.
| Headlines |
August 2006 |
July 2006 |
| Monthly index * Q1 '93 = 100 |
331.9 |
329.4 |
| Monthly change* |
0.8% |
0.8% |
| Annual change |
6.6% |
5.9% |
| * seasonally adjusted |
|
|
|
Fionnuala Earley, Nationwide's group economist, said, "House prices are
now 6.6% higher than at this time last year. This is the fastest annual rate
of growth since April 2005 and almost three times faster than at this time last
year. The underlying market remains fairly firm with prices increasing by 0.8%
in August."
The typical house in the UK now costs £167,721. This is £10,412
higher than August 2005 - the equivalent of a rise of almost £30 per day.
The housing market is unlikely to slow as rapidly as in last rate rise cycle
said the Nationwide report.
The rise in interest rates in August, together with the expectation of another
rise before the end of the year, naturally leads to comparisons being drawn between
now and the last cycle of interest rate rises. The five increases between November
2003 and August 2004 led to a rapid fall in house price inflation, from over
20% in July 2004, to 2.3% by the time rates were reduced again in August 2005.
Fionnuala Earley said: "While we expect base rates to reach 5% by the
end of the year - above the peak of the last rising cycle - we do not expect
the market to slow as sharply as before."
"There are three main reasons for this. First, current macroeconomic
conditions suggest fewer increases in base rates; secondly, fixed mortgage rates
have moved more gradually, and thirdly, demand, particularly from the investment
sector, is likely to remain fairly supportive."
"The rise in rates will undoubtedly have sent a cautionary signal into
the market, but inflationary pressures in the economy now are less certain than
in the previous cycle."
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