16 November 2007House price growth is set to stall next year as the market witnesses a "significant slowdown", building society Nationwide has warned.
It predicts that annual house price inflation in the UK will slump from its current level of 9.7% to 0% by this time next year.
Nationwide blames a slower economy, stretched affordability, tighter credit conditions and lower buy-to-let demand.
Almost all surveys suggest the market has been cooling since the summer.
Loss of 'momentum'
The building society expects there will be a large regional variation in house price growth in the coming twelve months.
As we move into 2008, economic tailwinds are increasingly being replaced by headwinds
Fionnuala Earley, chief economist, Nationwide
Scotland is forecast to do best with prices rising by 4%. In Northern Ireland, which has been enjoying "phenomenal" price growth of 40% plus year-on-year, Nationwide believes prices will fall by 5%.
Fionnuala Earley, Nationwide's chief economist, said the "momentum" that had kept prices strong in 2007 was now fading.
"A slowing economy, tighter credit conditions, stretched affordability for first-time buyers and lower house price expectations appear likely to reduce the level of activity," she explained.
"As we move into 2008, economic tailwinds are increasingly being replaced by headwinds," she added.
Nationwide is also predicting a cooling in the buy-to-let market.
"Poor yields, lower house-price expectations and tighter credit conditions are all likely to take some froth out of buy-to-let and limit its contribution to price growth," said Ms Earley.
But Nationwide believes recent fears predicting a "mass exodus" from the sector appear "overdone".
On Thursday, in its latest quarterly inflation report, the Bank of England also warned of a number of risks to the UK economy next year.
Analysts argue that the Banks comments may point to a lowering of interest rates in coming months.
Nationwide believes that further interest rate cuts - added to the continuing lack of housing supply - could provide "some support" to price growth but are unlikely to prevent a "significant slowdown".
The building society is the latest group to publish its house price predictions for 2008.
Property website Hometrack and the Council of Mortgage Lenders have both forecast that prices will rise by 1%. Capital Economics believes prices will fall by 3% during both 2008 and 2009.
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