House price slowdown already under way

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The Independent Online

The housing market has begun to slow, according to anecdotal evidence that appears to contradict the latest record rise in house prices.

The housing market has begun to slow, according to anecdotal evidence that appears to contradict the latest record rise in house prices.

Housebuilders are reporting that the rise in prices is returning to more "normal" levels after the huge surge in activity in the first few months of the year.

A natural slowdown would delight the Bank of England, which has warned it will have to raise interest rates unless consumer spending – including house price growth – failed to moderate of its own accord.

Halifax, the largest mortgage lender, yesterday said the annual rate of house price inflation hit 19.3 per cent in June, its highest level since the peak of the last boom 13 years ago,

The high street bank doubled its forecast for growth this year to 15 from 7 per cent.

"Slower income growth, higher interest rates and lower buy-to-let volumes are likely to act to brake the growth in house prices in coming months," said Gary Styles, its head of group economics.

The bank has predicted a slowdown all this year as annual growth accelerated from 15 per cent to last month's 19 per cent.

But according to Britain's leading housebuilders, Persimmon, Bovis, George Wimpey and Berkeley, the slowdown is already underway.

John White, the chief executive of Persimmon, the largest of the four housebuilders, said there had been a lower level of price increase in recent weeks.

"We saw significant moves in prices in the first few months of the year but these have now slowed considerably and we expect that the rest of the year will see a slower rate," he said. "It is not a seasonal thing – it is the real thing."

Mr White said housebuilders had seen previous turns in the market – either up or down – before they filtered through to the banks.

"We are seeing movements at the front end of the market because we are talking about reservations rather than sales which are a bit further down the process," Mr White said. "We see the trend a bit sooner."

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