There are signs that the underlying rate of house price growth has peaked, as thirteen of the twenty cities tracked by the Hometrack Cities Index have registered a slower rate of growth post-election.

City level house price growth tentative slowdown
City level house price inflation is running at 8.4% per annum up from 6.6% in May as a post-election surge in demand continues to put upward pressure on house prices. There are signs that the underlying pace of growth may have peaked. The three month rate of growth expressed on an annualised basis appears to have reached a peak (fig.1).

Table 1- UK 20 city index summary, September 2015

Source: Hometrack House Price Indices

The year on year rate of house price growth masks more volatility in the underlying rate of growth. There is a clear cyclical movement in house prices and since March 2015 the 3 month rate of growth, expressed on an annualised basis has risen to over 16%, slipping back slightly in September to 15%. This will in part be due to seasonal factors with mortgage approvals for home purchase increasing strongly over June and July while falling back 15% in August. The outlook for housing demand remains positive but the question is whether the post-election surge can be sustained. We expect demand to moderate in the run up to the year end with a modest slowdown in the pace of monthly house price growth compared to the last four months.