Investors may leave homes

Nationwide is warning that buoyancy in the equity markets could attract investors’ attention and contribute to a slowdown in the property market.

The society’s latest house price index shows prices were up by 0.7% in October, with the price of a typical house being 169,623 – some 12,500 higher than at the same time last year.

But it also found that while house purchase approvals have risen in recent months, enquiries and sales by estate agents have seen a big fall.

Fionnuala Earley, group economist at Nationwide, says: “Higher prices and interest rates reduce yields and as annual net yields are already negative in some parts of the country this makes it more likely that investors will look for alternatives to housing.”

Although equity prices have been growing faster than house prices since April 2005, this has not stemmed the appetite for housing investment.

Earley attributes this to volatility in the stock market and suggests that investors are waiting to see a sustained period of growth before switching.

But she says the potential for growth in the stock market could be rosier than in the housing market.

However, economist John Wri-glesworth says that even if investors switch their attention from housing to equities, it is un-likely to have a huge effect on the market.

He adds: “People will still need somewhere to live and anyway, investors are not a huge part of the housing market. They don’t make too much of an impact. Plus, the majority of investors are buy-to-let landlords – housing is their business.”

Earley adds: “The momentum that has built up in the housing market means we can still expect relatively strong growth in the short term.”