Annual house price growth slowed to 10% in August from 11% in July, according to the latest report from Nationwide.
The average house in the UK rose to £273,751 against £271,209 month-on-month, representing an almost £50,000 price growth in the past two years.
There were early signs the housing market is losing steam, with surveyors confirming a drop in new buyer enquiries in recent months and the level of mortgage approvals sliding below pre-Covid numbers.
Nationwide noted the slowdown had been rather minor, keeping housing price growth robust in combination with a short supply of properties for sale on the market.
However, the organisation said the combination of rising interest rates and the cost of living crisis would probably throw cold water on housing demand in the coming months.
“We expect the market to slow further as pressure on household budgets intensifies in the coming quarters, with inflation set remain in double digits into next year,” said Nationwide chief economist Robert Gardner.
“Moreover, the Bank of England is widely expected to continue raising interest rates, which will also exert a cooling impact on the market if this feeds through to mortgage rates, which have already increased noticeably in recent months.”
Energy price cap adds pressure
The 80% rise in the energy price cap is set to devour consumer budgets as winter approaches, however even the average £3,545 per year energy bill might not keep the housing market suppressed for long.
“The energy cap rise will eat into disposable income, making it harder for buyers to save for a deposit – and fast-rising rents are not offering any relief and could keep some buyers in the hunt for a home for longer than they would like,” said interactive investor senior personal finance analyst Myron Jobson.
“But even though the housing market is slowing, it is nowhere near a crash. Strong demand for homes far outstripping available housing inventory means the housing market remains a difficult one for wannabe homeowners and those looking to climb up the property ladder.”
“After a period of stratospheric growth, it could be some time before we see steep declines in house prices. The supply-and-demand imbalance isn’t going away, even though the red-hot housing market has cooled in recent months.”
