House prices to slowdown next year

Written by renxue January 09, 2008 14:34

The Nationwide Building Society has warned that house price growth could grind to a halt next year, stating that there will be a 'significant slowdown' in house price growth over 2008.

The current level of annual house price inflation stands at 9.7% but officials from Nationwide state that this could plummet to 0% by this time next year. The building society has said that a number of factors have led to this predicted slowdown, including lower demand for buy to let, lack of affordability, tighter lending criteria, and a slump in the economy.

Many surveys into house price growth have been carried out over recent months, and all have indicated that the housing market is cooling, and that it will continue to do so in the coming months. Nationwide officials expect there to be large variations in house price growth based on region over the next year. It is predicted that Scotland will fare best, with house price growth of 4% but that Northern Ireland will see house prices fall by 5% after several years of impressive house price growth.

The Chief Economist at Nationwide stated: "A slowing economy, tighter credit conditions, stretched affordability for first-time buyers and lower house price expectations appear likely to reduce the level of activity. As we move into 2008, economic tailwinds are increasingly being replaced by headwinds."

She also commented on the expected cooling in the buy to let market, stating: "Poor yields, lower house-price expectations and tighter credit conditions are all likely to take some froth out of buy-to-let and limit its contribution to price growth."

Officials from the building society also feel that interest rate cuts, which are expected to come next year, could help to ease the impact on house price growth but are unlikely to make any significant difference.

Tom Smith
27th November 2007