Annual house price growth has slowed to its lowest level in
nine years, according to the Nationwide.
Prices fell a seasonally adjusted 0.2%
in August, the society said, leaving the average cost of a
home at £157,310.
Annual price growth fell to 2.3% from
2.6% in July. However, in the three months to August prices
grew by 0.3%.
Prices were experiencing a
"continued controlled slowdown", Nationwide said -
in line with the view that the market is heading for a soft
landing.
'Increased optimism'
"In spite of a fair deal of bearish
comment, the housing market has remained quite resilient this
year following last year's interest rate hikes,"
Nationwide group economist Fionnuala Earley said.
The figures were in line with recent
surveys from the Land Registry and Office of the Deputy Prime
Minister (ODPM) which showed annual house price inflation fell
from almost 20% a year ago to about 5%.
Ms Earley said that activity was
increasing with monthly purchase approvals on the up and
estate agents reporting that sellers were now willing to
adjust prices.
"This, along with a cut in interest
rates, has made it more of a buyers' market - which has led to
increased numbers of buyer enquiries and increased optimism
about sales from estate agents," she said.
Affordability worries
However, Ms Earley warned that the
appearance of a stabilising market did not necessarily signal
a renaissance.
First time buyers are still
finding it tough to get on the property ladder
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"Even though wage inflation is
almost twice the rate of house price inflation, affordability
is still an issue particularly for first-time buyers, and it
will take some time for the balance to be redressed."
Looking ahead, Ms Earley said she
expected the market to continue to cool in a "controlled
fashion".
Ed Stansfield at Capital Economics said
the figures were "no surprise" and showed the
Nationwide's figures were catching up with "long standing
anecdotal evidence" of a market slowdown.
"We're set for a period where
there'll be a steady drip feed of falls," he said.
Steady slowdown
Price declines experienced in London and
the South East are set to spread across the country he added.
The UK property market has been slowing
steadily over the past year, but most housing experts do not
expect a dramatic slump in prices.
Earlier this year Capital Economics had
predicted a 7% fall in prices during 2005. However, in June it
said its original forecast was too "gloomy" as the
market appeared to be undergoing a correction.
It now says a fall of around 2%-3% is
more likely. "We wouldn't expect to see a rapid change in
the rate of fall," Mr Stansfield told the BBC.
Last month, a study by the Centre for
Economic and Business Research predicted that prices would
fall 5% by 2007, but said that fears of a crash have been
overdone.