House price round-up December 2016: annual growth slows
House prices in the UK continued to rise steadily in October, with an annual increase of 6.9%, putting the average house price at £216,674, according to the latest figures from the UK House Price Index (HPI).
This is down from a 7.7% annual rise in September and an 8.4% rise in August. Monthly house prices hardly went up at all – a 0.1% rise compared with September.
While Londoners saw house prices go up by 7.7% over the year, bringing the average price to £474,475, on a monthly basis property prices fell by 1.2%.
As in September, the East of England saw the greatest house price growth, with property prices up by an average of 12.3% and the biggest monthly growth at 1.3%.
The UK HPI – which uses data from property transactions recorded by the Land Registry – also revealed that properties in the North East continued to have the slowest annual growth, with prices up by just 2.7%. Monthly prices were down by 1.3% compared with September.
Home sales in the UK were up by 1% between September and October, but were down by 8% compared with October 2015.
The report said that October showed “a period of modest increasing demand and steady growth in price levels”, with “evidence of recovery in the housing market since the weakness seen in the immediate aftermath of the referendum.”
Richard Snook, senior economist at PwC, says: “While the annual inflation rate remains high, prices have barely moved over the last three months. If this trend continues into 2017, we will see a pronounced drop in growth rates in the New Year. We project that UK house price growth for 2017 could range between 2% and 5%.
“Dampened” housing demand
Halifax reported similar figures for the three months to November, with house price growth 6% higher than in the same quarter of 2015. This was higher than October’s figure of 5.2%.
The UK’s largest mortgage lender also reported that prices from September to November were 0.8% higher than the previous three months. It put the average UK house price at £218,002.
Martin Ellis, Halifax housing economist, says: “Despite November’s pick-up, the annual rate has been on a steady downward trend in recent months since reaching a peak of 10% in March.
“Heightened affordability pressures, resulting from a sustained period of house price growth in excess of earnings rises, appear to have dampened housing demand, contributing to the slowdown in house price inflation. Very low mortgage rates and an ongoing, and acute, shortage of properties available for sale should help support price levels although annual house price growth may slow over the coming months.”
Tight demand/supply balance
Nationwide’s house price index for November reported annual house price growth of 4.4%, down 0.2% from October. It put the average house price at £205,947.
Robert Gardner, Nationwide's chief economist, doesn’t believe that housing demand has dampened. He says: “There are some signs that, despite the uncertain economic outlook, demand conditions have strengthened a little in recent months, reflecting the impact of solid labour market conditions and historically low borrowing costs. Mortgage approvals increased in October, and surveyors report that new buyer enquiries have increased modestly.
“The relatively low number of homes on the market and modest rates of housing construction are likely to keep the demand/supply balance fairly tight in the quarters ahead, even if economic conditions weaken, as most forecasters expect,” he adds.
Rob Weaver, director of Investments at property crowdfunding platform Property Partner, comments: “Onwards and slowly but surely upwards seems to be the trend with a mildly stronger performance in November.
“The housing market is showing remarkable resilience in spite of a few wobbles in confidence post-Brexit.
“We’re not in the dizzying double-digit percentage increases of mid-2014, but still house price growth, at least for those who have already bought, is comfortably creeping up.”
House prices fall
Looking at average prices of properties marketed on its portal over the past month, Rightmove reports a 2.1% – or £6,511 – drop in the price of properties coming on the market in November.
It points out that this is in line with the average over the past six years, and so is not unexpected. On a positive note, it reports an increase in buyer activity, with sales agreed up by 5.2% on November 2015.
Miles Shipside, Rightmove director and housing market analyst, says: “For the housing market, the uncertain outlook has meant a head and heart tug of war between ‘stay put’ and ‘carry on moving’. After a pause the mass-market seems to have opted firmly for the latter in most parts of the country.
“As we come to the end of the year, these figures showing high levels of sales agreed and dwindling numbers of homes for sale give a far greater level of reassurance about the outlook for 2017 than was previously available.”
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.