Nationwide, the world's largest building society, releases its December house price index on 29 December, and the report is expected to confirm that house price inflation continues to slow from earlier this year.
Prices in November, rose by just 0.3 per cent, down from a 0.5 per cent rise in October, which took the annual increase down from 9 per cent to 8.5 per cent, the third consecutive month that annual house price inflation has eased.
The softening trend highlights a near 20 per cent decline in mortgage approvals since the start of the year; they are now 27 per cent below the long-term average. Put another way, the number of mortgage transactions is currently equal to around 4 per cent of the housing stock, well below the long-run average of 6 per cent. But the slowdown seems to be at odds with a broadly upbeat economic climate, with employment rising sharply and average earnings at last beginning to claw back some of the spending power eroded as a result of inflation.
However, it is by no means certain that annual house price growth will continue to decline much further. The jury remains out on whether potential home buyers will be sitting on their hands in the run up to May's general election, but increased activity is almost certain to be stimulated by changes in stamp duty announced in the Chancellor's Autumn Statement. The new sliding scale of charges will make the burden of stamp duty that much less for houses in the low-to-mid range, and while large houses priced at over £2m account for less than 1 per cent of all housing transactions, even here the new charges should at least assuage worries about a mansion tax, should there be a change in government.
It's also worth pointing out that part of the recent cooling in UK prices reflects much slower appreciation in house prices in London, where the pace of price inflation was already regarded as unsustainable in the long term. But even here, the picture remains unclear. For while figures from the Land Registry showed that London recently experienced the biggest fall in demand, prices in the capital are still increasing, albeit on a modest month-on-month rate of 0.2 per cent; whereas the North East actually fell by 2.8 per cent month-on-month.
Much now depends on the availability of mortgage finance. The Bank of England acted earlier this year to tighten regulations governing capital requirements for the major mortgage lenders, but banks and building societies appear to have taken this on board, and are now showing signs of increasing their lending volumes, making it easier for potential first-time house buyers already supported by the Help to Buy scheme.
