House price inflation has halved in six months

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The Independent Online

More evidence that the property boom is grinding to a halt was published yesterday with a survey showing that the annual rate of house price inflation has halved in just six months.

More evidence that the property boom is grinding to a halt was published yesterday with a survey showing that the annual rate of house price inflation has halved in just six months.

The Halifax high-street mortgage bank said the average price of a home rose 8 per cent in the year to July. This was down from 9.2 per cent in June and a peak of 16 per cent in January. The market is at its weakest for more than a year.

Homes changed hands for an average of £84,278 last month, almost £1,000 off their new-year peak of £85,244.

Prices have fallen for four out of the past six months. Prices rose 0.3 per cent in July, making up for a 0.4 per cent fall in June. A spokesman for Halifax said: "Overall, house prices have been broadly unchanged over the past four months. This softening in the housing market is consistent with recent signs of reduced growth in consumer spending and retail sales, suggesting that household sector demand is less buoyant than a few months ago."

The bank said the four rises in interest rates between September and February, which added 1 percentage point to the mortgage rate, and the abolition of mortgage tax relief were the two main reasons for the slowdown. The figures will give comfort to the Bank of England, which has been worried about an inflationary housing boom.

Halifax said there was little fear of the slowdown turning into a slump, as it did a decade ago when annual house price rises of 35 per cent in 1988 had become falls of almost 10 per cent within three years. "The economy remains in good shape," Halifax stated yesterday. "This healthy economic background should continue to underpin relatively strong consumer confidence. These factors should support a steady housing market over the remainder of the year."

Experts believe the housing market is entering a period of stability compared with the wild gyrations of the past three decades. While this may disappoint homeowners hoping to make more money out of their home in a year than they earn at work, it will be welcomed by the housing industry.

The Royal Institution of Chartered Surveyors, which last month said optimism among estate agents had fallen to a two-year low, said a sense of normality was returning. Ian Perry, its housing spokesman, said: "The market overall is stabilising and we have seen over-priced properties and areas coming back down and under-priced ones picking up."

A survey from the Northern Rock mortgage bank showed that prices in north-east England rose by 5 per cent in the year to July. Alastair Laws, its senior valuer, said: "This gradual increase is preferable compared with other parts of the country where prices seem to have peaked."

Last week Roger Bootle, the economist who five years ago forecast the death of inflation, said the rollercoaster ride for home buyers had ended. He believed house prices would rise in line with overall inflation, currently 3.3 per cent.

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