House price growth continues to slow down

Published by Hannah Nemeth on 21 September 2017.
Last updated on 21 September 2017

House price growth continues to slow down

The UK House Price Index reports a fairly healthy 5.1% annual house price growth for the year to July. But August and September, which is covered by other indices, saw much lower annual growth of between 1.1% and 2.6%.

The slowdown in house price growth to generally a 2% to 3% range in 2017 compares with 4% to 5% growth in 2016.

However, as reported last month, a lack of supply of housing stock is still driving prices upwards.

Rightmove reports that the number of sales being agreed by estate agents is 4.8% higher than the same period a year ago in all regions including London, where the number of sales agreed is up by 5.6%.

Key stats at a glance

  • UK House Price Index for July 2017: House prices up by 5.1% annually. Average price of a UK property: £226,185. Monthly change: +1.1%.
  • Halifax House Price Index, August 2017: House prices up by 2.6% annually. Average price of a UK property: £222,293. Monthly change: +1.1%.
  • Nationwide House Price Index, August 2017: House prices up by 2.1% annually. Average price of a UK property: £210,495. Monthly change: -0.1%.
  • Rightmove House Price Index, September 2017: Asking prices up by 1.1% annually. Average asking price of a UK property: £310,003. Monthly change: -1.2%.

 


Note: See Methodology (below) for how the data for each index is calculated.

The latest figures from the UK House Price Index (UK HPI) for July shows an annual price rise of 5.1% over the year, putting the average property in the UK at £226,185.

In England, prices have risen by 5.4%, with a monthly price rise of 1%, with the average property priced at £243,220.

In Wales, annual price growth has continued its downward trend and now stands at 3.1%, with an average property price of £150,846. Since June, house prices have risen by just 0.3%.

In London, annual house price growth has continued to fall, with just a 2.8% rise over the year and a 0.3% monthly rise. The average price of a property in the capital is £488,729.

Regionally, the East Midlands witnessed the highest annual growth, with property prices up by 7.5%, while the North East had the greatest monthly price increase of 3.3%.

Commenting on the UK HPI, Thomas Fisher, economist, PwC, says that the housing market has remained “resilient” over the summer months, but sees some regional variations.

“Regionally, house price growth continues to be weaker in London and the South East, where year-on-year growth rates in July were 2.8% and 3.8% respectively. Meanwhile, growth of over 7% in both the East Midlands and the East of England continues to drive average house price growth up for the UK overall.

“The average house price in the South West hit a new high of £252,000, breaking through the quarter of a million mark for the first time.

“Factoring in continued pressure on household incomes in the second half of the year, we anticipate a likely weakening in UK house price inflation to around 4% on average for 2017.”

‘Buoyancy may be returning’

Halifax reveals that house prices in the three months to August were 2.6% higher than in the same period a year ago. It reports that house prices were up by 1.1% since July, with the average price now £222,293.

Russell Galley, managing director, Halifax Community Bank, says: “Recent figures for mortgage approvals suggest some buoyancy may be returning, possibly on the back of strong recent employment growth, with the unemployment rate falling to a 42-year low. However, wage growth is still lagging increases in consumer prices, which is likely to add pressure on household finances and increase affordability challenges for some buyers.”

He adds that low mortgage rates and a shortage of properties for sale should help to support house prices.

Commenting on Halifax’s data, Jonathan Hopper, managing director of Garrington Property Finders, says that it shows that the property market has bounced back quickly after the usual summer hiatus.

He says: “After months of uncertainty, the property market is slowly finding its feet again. The chronic shortage of supply has placed a floor under prices, while demand has been underpinned by a combination of benign interest rates and a robust jobs market.

“The market remains deeply fragile, but the listless limbo that followed the election result is fading as increasing numbers of previously hesitant buyers are piqued into action by the sense that stability – if not quite normality – is returning.”

‘Slowdown is surprising’

Nationwide reports that annual house price growth has slowed from 2.9% in July to 2.1% in August, with an average property price of £210,495.

Commenting on the figures, Robert Gardner, Nationwide's chief economist, says: “The economy grew by circa 0.3% per quarter in the first half of 2017, around half the pace recorded in 2016. The number of mortgages approved for house purchase moderated to a nine-month low of circa 65,000 in June, and surveyors have reported softening in the number of new buyer enquiries.  

“Nevertheless, in some respects the slowdown in the housing market is surprising, given the ongoing strength of the labour market. The economy created a healthy 125,000 jobs in the three months to June and the unemployment rate fell to 4.4% – the lowest rate for over 40 years. In addition, mortgage rates have remained close to all-time lows.”

Mr Gardner suggests that the rising of cost of living and its impact on household finances may have led to affordability issues for some home buyers, particularly in London and the South East.

However, he believes that limited supply of housing stock will help to shore up house prices, adding: “The stock of homes on estate agents’ books remains close to 30-year lows and the number of new homes coming on to the market remains subdued.”

He expects house prices to rise by around 2% over 2017.

Commenting on Nationwide’s data, Lucy Pendleton, founder and director of independent estate agent James Pendleton, says: “We’re back into negative territory and the annual growth rate has been broadly shrinking like a tyre with a slow puncture since the middle of last year, so no surprises that the trend has continued. The annual rate of growth has more than halved in a year, from 5.6% 12 months ago.”

On a more positive note, she points out that the market is still outpacing the economy in general by a considerable margin.

“Economic growth was running at only 0.3% in the second quarter, so the housing market still has a solid lead,” she adds.

‘Buyers are still keen to buy – at the right price’

Rightmove reports that monthly asking prices were down by 1.2% in September – a drop of £3,660 and the first monthly price fall at this time of the year since 2013.

It points out that this fall is exacerbated by a -2.9% monthly drop in London house prices. Take London out of the equation, and the monthly drop would be just -0.5%. It suggests that falling prices in the capital are down to a ‘readjustment’ in more expensive London boroughs.

Miles Shipside, Rightmove director and housing market analyst, says: “There were Autumn price bounces nationally in 2014, 2015 and 2016, but the south of the country has turned this month into a bit of a damp squib, whilst some northern regions are still showing marginal signs of upwards price pressure.

“Estate agents are clearly advising many sellers that they have to lower their price expectations to fit in with buyers’ stretched financial resources, with that price compromise hopefully generating extra buyer interest.”

He concludes: “With competition among lenders to lend, increasing wages and the lowest level of unemployment since 1975, buyers are still keen to buy if the property is worth the money and well-presented.

“If more sellers appreciate that sensible pricing is the best way forward, then this will help to maintain good levels of buyer activity despite the uncertain political outlook.”

METHODOLOGY

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.

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