Nationwide foresees housing slowdown

There are tentative signs of a slowdown in the housing market, Nationwide building society said yesterday.

Its latest figures showed house prices rose at their slowest pace for six months in October. A slowdown in London and south-east England was offset by strong rises across the rest of the country.

But Nationwide agreed that the market was still "undeniably robust" and warned that only a substantial rise in unemployment would prevent another year of double-digit price growth in 2003.

The price of the average home rose by 1.4 per cent in October to £113,665 compared with 2.1 per cent in September. It was the weakest month since March.

But prices are now 24 per cent higher than a year ago – the fastest annual pace of inflation since 1989 – although Nationwide said this was distorted by a slump in October 2001 caused by 11 September.

Alex Bannister, Nationwide's group economist, said he could not be sure that October had marked a turning point in the UK's long-run housing boom.

"It is not definitive evidence of a slowdown. But my own view is that in some senses the market is calming down," he said.

Nationwide said it expected the rate of price rises to moderate further over the coming year, starting in the South-east.

Mr Bannister said the recent surge in prices in and around London had put property out of reach of many first-time buyers, who now needed to be on almost twice the average London salary to get a foot on the ladder.

Alan Castle, an economist at the City investment bank Lehman Brothers, was not convinced the market had peaked. "Only in the UK would a 1.4 per cent monthly increase in prices ... be greeted as a slowdown," he said.