Annual house price growth in the UK slowed in August but was still higher than expected according to building society Nationwide, and analysts expect the slowdown to continue in the coming months.
Price growth slowed to 10% in August from 11% in July, but was ahead of expectations for an increase of 8.9%.
On the month, house prices rose 0.8% following a 0.2% increase in July, well ahead of forecasts for growth of 0.1% .
Shares in housebuilding companies fell back after the news with Persimmon PLC (LSE:PSN) down 1.25%, Barratt Developments PLC (LSE:BDEV) down 1.24%, Taylor Wimpey PLC (LSE:TW.) down 2.2% and Bellway PLC down 2%.
Nationwide chief economist Robert Gardner said: "There are signs that the housing market is losing some momentum, with surveyors reporting fewer new buyer enquiries in recent months and the number of mortgage approvals for house purchases falling below pre-pandemic levels.”
“However, the slowdown to date has been modest, and combined with a shortage of stock on the market, has meant that price growth has remained firm.”
"We expect the market to slow further as pressure on household budgets intensifies in the coming quarters, with inflation set to remain in double digits into next year” he said.
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said “The latest data from Nationwide suggests that buyer demand is weathering the significant jump in mortgage rates.”
However, she said she struggled “to see a scenario in which house prices do not fall outright in the second half of the year; the rise in mortgage rates has just been too severe at a time when real incomes are falling.”
Martin Beck, chief economic advisor to the EY ITEM Club, said “pressure on the housing market is only going to increase in coming months.”
“The EY ITEM Club still thinks that a substantial slowdown in house price growth is more likely than an outright contraction.”
“But the possibility that the Bank of England might respond to high inflation by raising interest rates too far, too fast means the risk of a ‘hard landing’ is growing.”