Further evidence that house price inflation is falling has come from the Department of Communities and Local Government (DCLG). House prices across the UK edged up 0.5 per cent in August, taking the average price across the country to £219,528. However, the annual inflation rate for property fell from 12.4 per cent to 11.4 per cent.

Hot on the heels of evidence from other surveyor and lender surveys, the report appears to confirm a recent downturn in the property market, with the inflation rate drop proving that the market is responding to the Bank of England’s five interest rate rises since the summer of 2006. Prices appear to be cooling off in the capital, which is illuminating, since London has been the driving force behind house price inflation in the UK.

‘Annual house price inflation in London was 17.4 per cent in August, down from 19.1 per cent in July,’ said the DCLG. With fewer homebuyers taking out new mortgages, it seems likely that house prices will come down further during the rest of the year as the number of sales declines.

According to Howard Archer, economist and spokesperson at forecasting body Global Insight, ‘The data adds to the now markedly growing evidence that the housing market is cooling in the face of the financial market turmoil and the increasing affordability pressure on homebuyers.’