House prices grew by 0.7% in April, according to housing information business Hometrack. Despite a 9.6% rise in sales volumes during the month, the growth was down from 0.8% in March, which led the report to conclude that higher interest rates and growing affordability pressures are starting to have an impact on the rate of growth.
Richard Donnell, head of Residential Research at Hometrack said he expects these factors to result in a slowdown in the rate of house price growth over the second half of this year: ‘We are now beginning to see the impact of the three interest rate rises since August last year. Outside London affordability pressures are beginning to bite and we are seeing a slowing in the rate of house price growth.’
There are also other factors at play: Hometrack says the supply of properties coming onto the market for the past two months has exceeded the increase in demand. Home Information Packs are also expected to impact on supply and demand, as agents encourage vendors to put their properties on the market before the June 1 deadline for the mandatory packs: ‘It means that people are effectively bringing forward their decision to sell and could, in fact, lead to a worsening in the supply situation following their introduction,’ Mr Donnell continued.
The survey also shows that the year-on-year growth rate in six out of ten regions is still less than 3%: as in previous months, it says, it is the strength of the London market that has driven the headline rate of house price inflation. It is possible that a further rate rise would inevitably put a squeeze on would-be purchasers in the South, but higher rates may well impact on further regions that are already seeing little in the way of price rises.