Slowdown in annual house price growth

28 April 2016

House price growth in the UK slowed down in the year April, according to the UK’s largest building society.

Nationwide found that house prices in April rose by 4.9% year on year - down from an annual growth of 5.7% in the year to March.

However, house prices were up by 0.2% compared to March, despite the rush being over of buy-to-let buyers trying to beat the 1 April stamp duty hike.


It takes the average price of a house in the UK to £202,436 – up from £200,251 in March.

The lender – which bases its monthly data on mortgages it has approved – reports a surge in the number of residential property transactions in March of both mortgaged and cash purchases ahead of the additional stamp duty levy on second properties. There were 165,400 transactions during March, according to HM Revenue and Customs – 11% higher than the previous peak of 149,000 in 2007.

“It may be that the surge in house purchase activity resulting from the increase in stamp duty on second homes from 1 April provided a temporary boost to prices in March,” says Robert Gardner, Nationwide’s chief economist.

“However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead.”

Mr Gardner also warns of the impact of further measures to curb enthusiasm for buy to let, which come into force next year.
He says: “House purchase activity is likely to fall in the months ahead, given the number of purchasers that brought forward transactions. The recovery thereafter may also be fairly gradual, especially in the buy-to-let sector, where a wealth of other policy changes, such as the reduction in tax relief for landlords from 2017, are likely to exert an ongoing drag.”


Land Registry’s figures show drop in transactions

In other news, the Land Registry has today published its market trend figures in England and Wales for March, which is based on completed house sales.

These reveal an annual price rise of 6.7%, putting the average house price at £189,901. Monthly house prices fell by 0.5% between February and March.

London had the greatest increase in its average property value over the past year ¬¬– up by 13.9% – and was the only area, along with the East, to experience any monthly growth, at 0.2%. In contrast, the North East had the only annual price fall – down -0.7%.

The number of completed house sales in England and Wales fell by 5% to 54,254, compared with 56,937 in January 2015.

Meanwhile, the number of properties sold in England and Wales for more than £1 million went up by 2% to 938 from 916 in February 2015.


Repossessions fell by 51% to 322 compared with 657 in January 2015; in London, the number of repossessions fell by 72% over the same period – down from 76 to 21.

Looking ahead to how Brexit may affect the property market, Property Partners’ Rob Weaver says: “No ifs, no buts. With just a few months’ warning, it was almost inevitable there’d be a dampening in April, in sharp contrast to a surge in activity in March with the knock-on effect on house prices.

“Where next is more difficult to judge. Despite strong employment, wage growth and cheap borrowing, there are jitters over whether we’re in or out of Europe.

“It’s likely this uncertainty will have a pause effect on prices in the lead up to June 23, with a fall in property transactions. But what is certain, there are fewer decent properties currently available on the market as buy-to-let landlords have sucked them up pre-April.”

Commenting on the Land Registry figures, Jeremy Leaf, a former RICS chairman and north London estate agent, says: “The month-on-month fall in the average house price is not a surprise as the market is gearing up for a change.

“However, bearing in mind the historic nature of these figures, we would have expected higher transaction levels as the stamp duty deadline approaches. But with the number of completed house sales in England and Wales falling by 5% in January compared with the same month last year, there does not seem to have been the stampede that many expected. It may be that investors and second homebuyers left it really late in the day and it is February and March’s figures that will show a significant uplift in transactions.

“A decline in number of property transactions continues to be a worry, as if people aren’t able to move in and out of the market when they want to, there will be an inevitable knock-on effect for the rest of the economy. On the ground, we want to see more balance between supply and demand.”


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