Housing market set to stay buoyant despite warnings

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The Independent Online

House prices rises are set to slow down, but the market will remain buoyant despite warnings that the property boom is unsustainable, the Halifax Building Society said yesterday.

Britain's biggest mortgage lender said house prices rose by 0.7 per cent in July, the lowest increase since January, putting the average cost of a home in Britain at £92,718.

The figures, which leave house-price inflation unaltered at 9.6 per cent, followed a warning from the Nationwide Building Society that the rate of increase was unsustainable. The Nationwide's figures recorded a 1.1 per cent increase in July and annual house-price inflation of 10.9 per cent.

Yesterday, Martin Ellis, economist for the Halifax, said that although the rate of increase was likely to slow as the manufacturing recession spread to the rest of the economy, there was no reason to think prices would fall.

"Slower economic growth – apparent in the decline in gross domestic product growth in the second quarter – is likely to curb housing demand and cause house-price inflation to ease over the coming months," he said.

But he added: "Consumer sentiment has remained high, notwithstanding the global economic slowdown, the recession in the UK manufacturing sector, and the fall in share prices. The continuing fall in unemployment and the record high level of unfilled job vacancies, have been key factors underpinning this confidence so far this year."

Mr Ellis said this week's 0.25 per cent cut in interest rates was unlikely to have an effect on the housing market, since it was introduced to counter economic slowdown that would, itself, restrict housing demand.

The Halifax said prices in most parts of the country were increasing at between 4 to 6 per cent a year. Only London, with a 17 per cent increase, and the South East, with an 11 per cent, had very big rises. The society predicts prices will increase by 7 per cent this year.