House prices in the UK recorded their third consecutive monthly decline for the first time since 2009, down 0.2%, taking the average value to £208,711, the latest index shows.
The figures from lender the Nationwide also show that annual house price growth also fell to 2.1%, and chief economist Robert Gardner said it provides further evidence that the housing market is losing momentum.
But he pointed out that it is too early to say whether the slowdown in house price growth is merely a blip, a reflection of the impact of the squeeze on household budgets, or is due to mounting affordability pressures in key areas of the country.
‘Given the ongoing uncertainties around the UK’s future trading arrangements and the upcoming election, the economic outlook is unusually uncertain, and housing market trends will depend crucially on developments in the wider economy,’ he explained.
‘Nevertheless, in our view, household spending is likely to slow in the quarters ahead, along with the wider economy, as rising inflation increases the squeeze on household budgets. This, together with mounting housing affordability pressures, is likely to exert a drag on activity and house price growth in the quarters ahead,’ he added.
‘However, the subdued level of building activity and the shortage of properties on the market are likely to provide support for prices. As a result, we continue to believe that a small increase in house prices of around 2% is likely over the course of 2017 as a whole,’ he said.
He also pointed out that if history is any guide, the slowdown is unlikely to be linked to election related uncertainty. ‘Housing market trends have not traditionally been impacted around the time of general elections. Rightly or wrongly, for most home buyers, elections are not foremost in their minds while buying or selling their home,’ he explained.
Alex Gosling, chief executive officer of online estate agents HouseSimple, believes that unless there is an upset at the election it is likely that there will be a bounce in the market.
‘Although three consecutive months of negative price growth is a concern, it doesn’t mean the property market is staring into the abyss. This feels like a market that is taking a breather not a market on a downward spiral. A lack of supply is still supporting prices and mortgage rates remain extremely low with plenty of competitive deals on offer,’ he added.
Jonathan Hopper, managing director of Garrington Property Finders, pointed out that the slowdown is anything but uniform. ‘Properties in some regions are seeing double digit price reductions, yet at certain price points in the most in-demand areas, gazumping and intense competition between buyers are the order of the day,’ he said.
‘If there is one universal it is the chronic shortage of supply. Where there are more buyers than homes for sale, prices will inevitably edge upwards. As a result increasing numbers of would be buyers are facing a tricky affordability balancing act, squaring falling real wages with slowly rising house prices,’ he explained.
‘Over the coming weeks the market will remain under close scrutiny to establish whether we are seeing a new trend or if the current lull will be short lived. If the election result puts Brexit back on track, by the end of the month the property market could clear the current bump, freeing up more supply and with greater levels of clarity spurring discretionary buyers into action,’ he added.
According to Rob Weaver, director of investments at property investment marketplace Property Partner, believes that it means the usual summer slowdown has started early. ‘We favour a steady market, and we have been saying this for a long time now. Long term steady growth is far healthier than the significant increases of recent years,’ he said.
‘There are regional disparities, and there is a little bit of price correction going on in the housing market where certain areas were inflated. For example, in prime central London areas like Chelsea and Mayfair. London in particular will be distorting the national average,’ he pointed out.
‘People also shouldn’t be swayed by any short term movements. There are no signs that house prices are set to fall sharply. The jobs market is too strong, mortgages are phenomenally cheap and lack of supply nationally is still a major hurdle. A slowing market is also an extremely good time to be a cash purchaser. In the coming months this slowing could present opportunities for investors, and could produce greater negotiating strength for first time buyers,’ he added.
Article published by Property Wire - 1st June 2017