(1888PressRelease)
February 21, 2007 - Monthly asking prices rose by just 0.9 per cent over the last four weeks, the lowest February figure for five years, in what is historically a very strong month for the housing industry, reports Right move.
However, estate agents report that activity levels are still comparatively high despite the supply of properties for sale at a three year low for the beginning of the year.
But this could be just the last flurry in a market that appears to be returning to interest rate control. Last year, especially in the second six months, house prices rocketed amid seemingly ever rising demand.
Such was the urge to buy among many consumers that a double interest rate rise in August and November failed to stem house price growth.
However, after a further interest rate rise in January, it appears that the market is finally slowing down.
Commenting on the figures, Miles Shipside, commercial director of Right move, said: "The shock tactic of one unexpected rate rise early in the year appears to have had the desired effect.
"With three interest rate rises in the last six months and the looming threat of another, it looks like we have finally reached the point where the market is highly interest rate sensitive.
"We are at a crossroads, and the path taken by those in charge of interest rate policy will dictate the direction of the housing market in 2007."
A problem that could affect the housing industry later in the year is the chronic lack of supply. In December, the average number of properties for sale per estate agent dropped to 51.9, down from a high of 65.7 in May and 59.8 in November.
Last month, this only rose to 53.9, as many homeowners appear to be waiting until the market picks up before selling their home.
Another potential cause of this drop in the number of homes for sale is the prevalence of people to renovate their homes rather than buy. With the average asking price now at £224,802 many are choosing to opt for the cheaper option of doing up their homes themselves.
Pierre Williams, head of communications of the Inside Track Group, said: "With prices being so high and with the costs of moving also very expensive in terms of Stamp Duty, agency and legal fees, there are no doubt some strong reasons for staying put and renovating or extending an existing home."
The cost of updating an older home has been estimated at £22,000 and if done correctly, can add significantly to the resale value of a property.
