House price inflation has levelled off as the revival in the housing market earlier in the year matures into steady growth, the FT house price index for August shows.
Annual house price inflation was 5.7 per cent in August in England and Wales, a touch higher than the upwardly revised 5.6 per cent rate in July. The growth rate of house prices has hovered around 5.5 per cent since April after rising from a low of 3.3 per cent in November 2005.
The stability in house price inflation since the spring and the 0.3 per cent monthly rise in August provides some evidence that the Bank of England’s quarter point rate rise last month has not had any noticeable effect so far on people’s willingness to buy or sell property.
The London market, which had been rising strongly earlier this year, became calmer in July, the most recent month for which regional house price data is available. Slower house price appreciation in London allowed the differential in house price inflation rates between the capital and other regions to narrow.
Gary Styles, economics director of Acadametrics, the consultancy that compiles the index for the Financial Times, said: “London and the South East have only seen monthly growth of around 0.1 per cent, so a further narrowing in regional differentials seems likely this year”.
London’s house prices were 9.6 per cent higher than a year earlier in July, while house price inflation rates ranged between 5 per cent and 6 per cent in the South East of England, the South West, Wales, the North East, and Yorkshire and Humberside. Prices in East Anglia grew by 4 per cent and the North West by 4.8 per cent.
Only in the Midlands were house prices growing much more slowly, with annual growth of 3 per cent in the West Midlands and 1.9 per cent in the East Midlands.
Mr Styles added : “We expect to see a steady and stable performance from house prices and activity across the country in the remainder of 2006 as the outlook for interest rates and employment prospects dampen confidence further particularly in the south,”
Outside London, Acadametrics commented that house price growth had shown very little regional variation compared with the recent past. The signs were that the stability in house price differentials would continue.
The differences between average house prices in the regions remains large, however. The average price of a property sold in London is £318,000, compared with £239,000 in the rest of the South East, £170,000 in the West Midlands, £154,000 in Wales and £143,000 in the North East.
The FT house price index is the most comprehensive measure of completed housing transactions in England and Wales, being based on Land Registry data of every house bought or sold, whether covered with a mortgage or not.
Its comprehensive sample generates a more stable series than many other housing indicators. But to achieve timeliness, the most recent figures include an element of modelling, and are revised as the data available to the Land Registry becomes complete.
This month, new data suggests the average house price in England and Wales in July was £204,005, compared with a £203,640 estimate reported a month ago.
