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House price slowdown shows ‘disconnect’ with economy

The housing market is continuing to slow with annual house price growth falling over the last month from 9 per cent to 8.5 per cent.

Data from Nationwide Building Society shows November was the third month in a row where house price has slowed, despite a 0.3 per cent month-on-month rise in house prices.

The average price of property has remained relatively flat at £189,388.

Nationwide chief economist Robert Gardner notes the number of mortgage transactions now stands at around 4 per cent of housing stock, compared to the long-run average of 6 per cent.

He says: “There is something of a disconnect between the slowdown in the housing market in recent months and broader economic indicators, which have remained relatively upbeat.

“While cooling in the London market is a part of the story, this is unlikely to be the main explanation for the slowdown.”

Gardner says affordability does not appear to be overstretched, with first-time buyers still accounting for an “unusually high” proportion of mortgages.

He adds: “Forward looking indicators, such as new buyer enquiries point to further softness in the near-term. However, if the economy and labour market remain in good shape and mortgage rates do not rise sharply, activity is likely to pick up in the quarters ahead.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. A disconnect with the broader economy I wonder what could be causing that its a conundrum.
    What doesn’t he come out with the reason rather than pretending he doesn’t know.

    If you restrict the money supply house prices fall its quite simple.
    Activity won’t pick up whilst the money supply is restricted why doesn’t he say that.

  2. Spot on again William.

    and the numbers of mortgage transactions is roughly 33% down on the long term average falling for the 3rd month in a row (3 out of the 6 MMR has been in place) by his own admission – wonder why ??

    Might it be the 30%ish market of mortgage prisoners as I (and many others) stated previously ?

    Rocket Science eh !!

  3. Aurangzeb Paracha 28th November 2014 at 4:58 pm

    I wonder the purpose of this article, I have read it 2/3 times to get some sense out of this observation.

    Housing price trends are a key indicator in regards to the overall positiveness of the population and economy. Properties are already over priced and the average property price is now around 6 times the average yearly earnings.

    Tougher affordability rules specially since the MMR have made it virtually impossible for a very significant population to qualify for a decent and competitive mortgage. Especially a majority of single income households and families with younger children find it very difficult to meet affordability criteria. A general ‘constipation’ and lack of confidence in the lending sector. Lenders are increasingly restricted and very nervous due to increasing burden of regulation and also repeated fines/redress by the regulators. Afterall lenders are primarily in the market to generate profits for their shareholders – this is the nature of capitalism.

    Overall a slow down in the housing sector was inevitable and it cannot be said that recent statistics in the mortgage market should come as a surprise – Its all relative: Every Action has an Equal and Opposite Reaction.

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