Halifax confirms housing bubble is bursting

Click to follow

More evidence emerged yesterday that the UK's booming property market is slowing down. Average house prices rose by 0.4 per cent in August but the inc-rease was down from July, according to the regular Halifax house price survey.

The August rise took the annual rate of house price inflation to 11.4 per cent and the average house price to £199,770. The monthly rise in house prices was half that recorded in July, when prices increased by an upwardly revised 0.8 per cent and the annual rate of house price inflation was 11.2 per cent. There is increasing evidence that affordability constraints are at last beg-inning to moderate the housing bubble.

Martin Ellis, chief economist at HBOS Halifax, said: "While the market remains robust, this provides further evidence that house price inflation has slowed since the beginning of the year.

The downward trend in house price growth is expected to continue over the remainder of 2007 as the five interest rate rises since last summer have an increasing impact on household spending and housing demand. Sound economic fundamentals, high levels of employment and a shortage in the number of properties available for sale will, however, continue to support house prices."

Month-to-month house price figures can be volatile. The Bank of England Monetary Policy Committee's preferred measure of house price inflation is the average of the three-month growth rates of Halifax and Nationwide. This fell to 1.7 per cent in August from 1.8 per cent in July. Most observers agree with the Halifax that the housing market will cool further this year but they also think a further move on rates by the Bank may be necessary.