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Is the housing market slowing down?

House price growth has fallen for the first time in 2014


The housing market slowed in the third quarter of 2014 according Nationwide’s house price index. Notably growth “softened” in the London market with growth 4.8% lower than in the second quarter.

Source: Nationwide Building Society

The slowdown comes after several months of consistent growth in prices. Despite the decline in growth, house prices still showed 10.5% year-on-year growth.

London leads the market

Just as London led the charge with house price rises significantly above the national average, it may be the first regional market to run out of steam.

Nationwide’s Chief Economist Robert Gardiner reports; “London did see a slight softening in the annual pace of price growth – from 25.8% in Q2 to 21%.”

However, it is still by far the strongest performing market with growth 10.5% above the national average. The North remains the slowest performing market with prices up by only 4.3% year on year.

Source: Nationwide Building Society

Average house earned more than average salary

One of the upshots of the rapid rise in house prices has been that houses could well be earning more than their owners.

The Office of National Statics (ONS) house price index released last week puts the average UK house price at £272,000, up from £260,000 in April.

The average UK monthly salary for permanent employees is £2,162, according to the career site Monster, but the average home would have appreciated around £3,000 per month between April and August, if the £12,000 growth was spread evenly.

Housing market bubble?

The housing market heated up as the economy entered into growth this year and was further stimulated by a combination of the government’s Help to Buy scheme and historically low interest rates.

This has prompted fears that the spectacular growth seen is a demand-driven market bubble, but it could also reflect a housing shortage, particularly in London and the Southeast.

What does all this mean for homeowners?

  • Looking to remortgage? Your loan-to-value ratio may have now shrunk significantly and you could enjoy lower interest rates.
  • Moving home? Your assets could now be much bigger, particularly if you are moving from London and the Southeast to elsewhere in the UK.

What does all this mean first time buyers?

  • Buying now? Remember it is only growth that is slowing, prices are still rising, so it’s still a case of the sooner you buy the better, however be wary of stretching your budget. If you buy whilst the market is at a peak, negative equity could be a possibility.
  • Buying in the future? A slowing growth rate could be good news if you want to buy a home, but can’t currently afford to, as your financial circumstances could begin to catch with house prices sooner.