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The latest property price indexes suggest a ‘mixed picture’ in the UK housing market.
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There was a sharp slowdown in house price growth in 2017, according to most major house price indexes, as political uncertainty, Brexit, economic instability, and a squeeze on real wage growth, continue to take their toll on the UK’s housing market.
The latest house price index by the Nationwide Building Society shows that the average price of a home in the UK increased by 2.6% in 2017, down from 4.5% in 2016 and 2015.
London was the weakest performing region, as stretched affordability, low yields for investors and concerns over Brexit and its impact on employment weigh on market sentiment.
At the end of the year the average house price across the UK was £211,156 – supported by a 0.6% rise in December.
“Low mortgage rates and healthy employment growth continued to support demand in 2017, while supply constraints provided support for house prices,” said Nationwide chief economist Robert Gardner.
“However, this was offset by mounting pressure on household incomes, which exerted an increasing drag on consumer confidence as the year progressed.”
House prices have fallen for the last two months running, according to the UK’s largest mortgage lender.
The Halifax said prices fell by 0.6% in January, following December’s drop of 0.8% – the first time prices have declined in two consecutive months since the summer of 2016.
However, on an annual basis the data shows that the cost of homes was still rising – by 2.2%. But that is the slowest rate of increase since July 2017.
According to the Halifax, the average price of a home in the UK was £223,285 last month, versus the £219,217 in January 2017, but lower than the highest recorded figure of £226,408 in November 2017.
Russell Galley, the managing director of Halifax Community Bank, commented: “Although employment levels grew by 102,000 in the three months to November, household finances are still under pressure as consumer prices continue to grow faster than wages.
“Despite the recent rise in the Bank of England Base Rate, mortgage rates are still very low.
“This, combined with an ongoing acute shortage of properties for sale, will continue to underpin house prices over the coming months.”
Hometrack, which analysed Zoopla listings data to compare asking and sold prices, report that the average discount narrowed from 3.2% between 2014 and 2016 to 2.9% in 2017.
According to Hometrack, the gap between asking and achieved prices is widening, reflecting the fact that sellers are becoming increasingly realistic and recognise that values have been somewhat out of kilter with what many purchasers are prepared or can afford to pay.
Listing prices across London have experienced greater levels of discounting, averaging now at 4%. Discounts of up to 10% were registered in inner London, where property price falls are occurring.
But while some sellers have dropped their asking prices to suit the change in market conditions, it is important to note that buyer momentum has not been entirely lost, especially in regional cities like Manchester and Birmingham where the markets are increasingly skewed towards sellers, as strong demand from buyers continues to place upward pressure on house prices.
Birmingham and Manchester have seen the discount more than halve from 6% in 2013 to just 2.7% in 2017 and a similar trend has been recorded in cities outside southern England.
In terms of annual property growth, Edinburgh is the UK’s fastest growing city at 8.2%, followed by Birmingham at 7.5% with Manchester and Glasgow also registering growth in excess of 7%.
Richard Donnell, insight director at Hometrack, said: “The level of discounting provides insight into the strength of underlying demand for housing across UK cities. Asking prices tend to act as the ‘shock absorber’ to softer pricing as demand weakens. However, once discounts get close to 10%, this is when falls in headline prices start to occur.
“These results confirm our view that the housing market is following the pattern registered in previous housing cycles with high rates of growth in London over the first half of the cycle being followed by low growth and an acceleration in regional housing markets as prices recover off a low base. We appear to be at this transition period once again.”
Asking prices for homes coming onto the market in Britain rose by 0.7% month-on-month in January to hit an average of £297,587, according to fresh data from Rightmove.
The property website said that the 0.7% monthly and 1.1% year-on-year price increases are indicators that demand remained robust, but buyers are still price sensitive and being ‘very choosy’ as reflected by the fact that the number of agreed sales in the final quarter of 2017 fell by 5.5% compared to the same period in 2016.
Miles Shipside, Rightmove director and housing market analyst, said: “Considering some of the gales that buffeted the market in the latter part of 2017, these early readings for 2018 show that there is currently a good following wind of search activity.
“To keep this year’s initial buyer momentum with you rather than against, serious sellers should note that all regions are currently selling at a slower rate than a year ago, indicating choosier buyers.”
British house prices were flat for the first time in more than four years in the three months to November, a closely watched industry survey from the Royal Institution of Chartered Surveyors (RICS) shows, as falling prices in London and surrounding areas dragged down the national average.
The house price balance of zero recorded by RICS in November (latest data released) represents a marginal drop from 1% growth a month earlier, meaning its members were evenly split between those reporting price rises compared with three months earlier and those seeing declines.
This was the lowest level for RICS’s price balance since March 2013.
There is every chance that property prices will fall over the next three months, according to RICS members.
“The mood music in London and the South East is very much flatter than elsewhere – and interestingly, the forward-looking indicators suggest this is likely to persist into the new year,” RICS chief economist Simon Rubinsohn said.
The latest data and analysis by the Office for National Statistics (ONS) has revealed that in the year to November 2017 average property prices in the UK increased by 5.1%, down from 5.4% in October 2017.
ONS reported that the annual growth rate has slowed since mid-2016 but has remained broadly around 5% during 2017.
According to the data, the average price of a home in November was £226,071, which is about £11,000 higher than in the corresponding month in 2016.
Russell Quirk, founder and CEO of Emoov.co.uk, said: “Although house prices are still up annually, a combination of seasonality and a subdued level of buyer interest have resulted in the market running lower on steam compared to previous months.”
England and Wales
The latest England and Wales HPI from Your Move has revealed that house prices ended 2017 up 0.2%, taking the average house price in England & Wales to £300,846, but this headline figure masks considerable growth outside of London, led by Bristol and the South West with prices up 8.9% and 5.3% respectively.
Elsewhere, year-on-year prices increased by 3.9% in the North West to £189,490, in Wales by 3.6% to £180,819, in the West Midlands by 3.3% to £216,819, in the East Midlands by 3% to £206,937, in the East of England by 2.7% to £325,113, in Yorkshire and Humber by 1.7% to £185,827, in the South East by 1% to £369,398 and in the North East by 0.4% to £156,718.
But average house price growth slowed year-on-year in England and Wales in December 2017 and was flat over the month, dragged down by a 4.1% annual fall in London.
London, the South East, Yorkshire and the Humber all saw home prices fall month-on-month.
Oliver Blake, managing director of Your Move and Reeds Rains estate agents, said: “The end of 2017 was relatively quiet for house movers, particularly in the capital.
“Outside of London, however, the majority of regions still reported growth over the month, demonstrating that there is still some strength going into the new year.”
Scottish house price growth continues to outstrip the rest of the UK, with the average price of a home north of the border having increased by £7,582 in the 12 months to December, the latest Your Move Scotland House Price Index has revealed.
Average house prices in Scotland grew 4.5% in 2017, the fastest rate since May 2015, supported by historically low interest rates, below average unemployment and – despite the price increases in the last year – comparatively affordable property, with the average price now £177,161.
Scotland’s affordability ratio – comparing median full-time earnings to median house prices – is the lowest of all British regions, at 4.7, against 7.8 for England.
Even excluding London and the South East, though, Scotland’s growth rate is double the rest of Britain’s, and easily faster than any other region.
Capital growth is being led by East Dunbartonshire, which takes in many of Glasgow’s suburbs. Property prices in the region rose 12.2% over the year, giving it now the most expensive average property price in the nation, at £259,566, ahead of East Renfrewshire, where average values now stand at £256,966.
Christine Campbell, Your Move managing director in Scotland, commented: “The combination of low interest rates, an unemployment rate lower than that of Great Britain and a number of schemes to assist buyers has contributed to ongoing demand for property. The problem remains, however, that there are not enough properties coming to market to sell – nor homes being built – which, in turn, is driving prices up.
“It’s important that, in the months to come, more emphasis should be placed on building homes – particularly those that are more affordable – to ensure that the market remains active and that any potential slowdown is avoided.”
A look ahead
House prices are likely to slow further in the coming months, especially in London and the South East, as economic activity and an ongoing squeeze on household budgets continue to have an impact on the market.