House prices are slowing down - its official

Filed Under Finance

Much as I has suspected from the number of houses that are proving difficult to sell in my area, house price growth is slowing down across the country.

The Nationwide, in its latest press release about the property market, points out that annual growth in house prices is slowing. The annual rate of growth fell to 9.6 percent during the last year, whereas it was 9.9 percent during the year to July.

Note that the Nationwide is not saying that house prices are falling, they are just not increasing as fast as they were.

Citing the impact of the latest interest rates and importantly the expectations of lower house prices as some of the main reasons for this slow down, the Nationwide is not, as yet, blaming the credit crunch issues as a major factor in the housing market.

That we are now starting to anticipate lower house prices is crucial. Financial markets are driven by sentiment and if enough of us believe that prices are going downwards, there will be less buyers and guess what happens? The house prices do go down until buyers feel confident to dip their toes in the water again.

So where are we in the cycle of house prices at the moment?

To my mind now is not the time to invest in property, unless you really have to. Are we at, or even slightly beyond, the peak of the market? Quite possibly, although some areas are still growing in demand, and sellers are still asking high prices.

I feel now is the time to reduce your debts - particularly your mortgage - and to save. With higher interest rates saving becomes more attractive.