Housing market is cooling off

7:23pm Tuesday 27th February 2007

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THE housing market is cooling off - but there's no need to panic.

That's the view from Swindon's Nationwide Building Society, which today released its authoritative monthly house price survey.

The society believes that there could be another interest rate rise on the cards, which would act to slow the market down further.

It says that buyer interest and mortgage demand are waning, but that the supply of properties coming on to the market is low, and this keeps prices up.

Group economist Fionnuala Earley said: "This lack of supply will mean that house price inflation will remain firm for a while longer, before gradually easing."

Prices this month compared to February last year were 10.2 per cent up. It means the average house price now stands at £174,706, more than £16,000 higher than this time 12 months ago, and equivalent to a rise of £40 a day.

But while the market is cooling, there are certain areas which are doing well according to Nationwide, which employs about 4,000 people in Swindon.

The buy-to-let sector is still "very firm" at the moment, the building society says.

Ms Earley said: "Looking forward the buy-to-let market is not immune from higher interest rates and we expect this to dampen new demand somewhat by putting further pressure on rental yields, although 57 per cent of buy-to-let investors still claim that they expect to acquire further properties during the next 12 months.

Nationwide says the market will slow down throughout this year.

Ms Earley said: "By the second half of 2007, we expect to see a more pronounced slowdown in the annual rate of house price growth.

"We do not expect a severe fall in confidence, even if interest rates were to rise once more, due to the continued strength of the economy and the labour market in particular."