House prices have remained fairly static over the past month, with the main house price indices either reporting modest rises or, in the case of Halifax, a drop of 1% since last month.
In terms of annual growth, property prices are going up at a slower pace, while Rightmove also highlights a shortage of properties for sale.
The consensus is that house prices will continue to rise in the second half of 2017 – albeit at a slower pace.
Key stats at a glance
- UK House Price Index for May 2017: House prices up by 4.7% annually. Average price of a UK property: £220,713. Monthly change: 0.5%.
- Halifax House Price Index, June 2017: House prices up by 2.6% annually. Average price of a UK property: £218,390. Monthly change: -1%.
- Nationwide House Price Index, June 2017: House prices up by 3.1% annually. Average price of a UK property: £211,301. Monthly change: 1.1%.
- Rightmove House Price Index, July 2017: Asking prices up by 2.8% annually. Average asking price of a UK property: £316,421. Monthly change: 0.1%.
The latest figures from the UK House Price Index (UK HPI) for May shows an annual price rise of 4.7% over the year, putting the average property in the UK at £220,713.
In England, prices have risen by 5.7%, with a monthly price rise of just 0.5%, which puts the average property at £237,662.
In Wales, annual price growth has slowed down to 3.8%, compared with last month’s 4.2% annual increase, with an average property price of £149,817. Since April, house prices have risen by 0.6%.
However, London witnessed a more marked levelling off of annual growth, with property prices up by 3% over the year and an average property price of £481,345. Londoners saw house prices fall by -0.3% over the month to May, with an average house price of £481,345 – down from £482,779 in April.
Regionally, the East of England experienced the highest annual growth – with property prices up by 7.5%. Property prices in the East Midlands were close behind at 7.2% annual growth.
Commenting on the UK HPI, Lucy Pendleton, director of James Pendleton estate agency, says: “Prices continue to edge down slowly, but activity levels remain strong. The reason for this is that the Mexican stand-off between buyers and sellers has failed to materialise.
“Most vendors are operating in the real world and are prepared to accept a realistic market price. This is keeping the market fluid. The gradual softening in prices we are seeing will ensure the market avoids a sharper correction.
"With supply so low and demand still robust given low mortgage rates and strong employment, prices certainly won’t be going off a cliff edge.”
‘Weakened housing demand’
Meanwhile, Halifax reveals that house prices in the three months to June were just 2.6% higher than in the same period a year ago – the lowest rate since May 2013. It reports that house prices were down by -0.1% between May and June.
Martin Ellis, Halifax chief economist, says that while house prices have flattened in the past three months, there are key factors that will help to keep prices stable.
“Although employment levels continue to rise, household finances face increasing pressure as consumer prices grow faster than wages.
This, combined with the new stamp duty on buy-to-let and second homes in 2016, appears to have weakened housing demand in recent months,” he says.
“A continued low mortgage rate environment, combined with an ongoing acute shortage of properties for sale should help continue to
underpin house prices over the coming months,” he adds.
‘A drag on housing market activity’
Nationwide reports an annual house price growth of 3.1% and house prices rising by 1.1% over the month to June – reversing a fall in prices over the previous three months, with prices up by £2,590 between May and June 2017.
Commenting on the figures, Robert Gardner, Nationwide's chief economist, says that the annual price growth gives a more accurate picture of trends in the housing market than the monthly figure.
“Annual house price growth edged up to 3.1% from 2.1% in May. In effect, after two sluggish months, annual price growth has returned to the 3% to 6% range that had been prevailing since early 2015,” he says.
Nationwide reports that house prices in London went up by 1.2% over the year – its weakest pace of growth since 2012.
“Spending is likely to slow in the quarters ahead, along with the wider economy, as rising inflation squeezes household budgets,” he explains. “This, together with ongoing housing affordability pressures in key parts of the country, is likely to exert a drag on housing market activity and house price growth in the quarters ahead.”
On a more positive note, he expects a small rise of around 2% over the course of 2017.
Russell Quirk, chief executive of online estate agent eMoov, adds: “Contrasting figures from Halifax after Nationwide reported signs of a pulse returning to the UK property market but, given both sets of numbers, it would seem reports of a market demise have clearly been exaggerated.
“Despite the recent claims the market is due to see a notable crash with prices falling by as much as 40%, this remains very unlikely. The market is not dead or running on the life support of easily obtained credit and has suffered more of a grazed knee than a fatal injury.
“Resilient levels of buyer demand, heightened by a paltry supply of stock and coupled with historically low interest rates will continue to fuel house price growth in the medium and long term.”
“Buyers will struggle to pay much more”
Rightmove reported that asking prices were down by 0.4% in June – a drop of £1,172 and the first price fall in June since 2009. However, by July they had recovered a little and were up by 0.1% or just over £300 over the month. This puts the average property price at £316,421 in July.
It points out that this 0.1% rise is better than a year ago when prices fell by 0.9% after the Brexit referendum.
The online portal reports that demand for housing remains high, with a shortage of unsold property for sale, with more than 45% of properties marketed by agents on the website being sold. This is the highest proportion ever recorded by Rightmove since it started tracking transactions seven years ago.
Miles Shipside, Rightmove’s director and housing market analyst, warns that affordability could be an issue: “Despite the number of sold boards outside people’s properties nearly equalling the number of properties that are still up for sale, especially as you go further north, sellers should note the market remains very price sensitive as some properties are hitting their price ceiling. Buyers, many of whom are sellers too, will struggle to afford to pay much more.”
Halifax House Price Index – This UK-wide index is based on the house purchase price at the mortgage approval stage. It calculates the annual change as an average for the latest three months compared with the same period a year earlier as it says its figures provide a better picture of the underlying trend compared to a monthly year-on-year number as they smooth out any short-term fluctuations.
Nationwide House Price Index – The data for this index for the whole of the UK is drawn from Nationwide’s house purchase mortgage lending at the post-survey approvals stage.
Rightmove House Price Index – The data is compiled from the asking prices of properties when they first come on to the market via over 13,000 estate agency branches listing on Rightmove.co.uk. The sample includes up to 200,000 homes each month – representing circa 90% of the market.
UK House Price Index – The UK HPI uses house sales data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland and is calculated by the Office of National Statistics.