House price growth hits five-year low as the squeeze on household budgets and Brexit uncertainty continue to bite

1 November 2018

UK house price growth fell to its lowest level in more than five years last month as the squeeze on household budgets and uncertain economic outlook surrounding Brexit continue to weigh on demand.

According to the Nationwide House Price Index, annual house price growth in October slowed to 1.6%, down from 2% in September – the lowest since May 2013.

On a monthly basis house price growth fell from 0.2% in September to 0%.

The average UK house price was £214,534, down from £214,922 in September.

Nationwide says the squeeze on household budgets and the uncertain economic outlook is likely to have dampened demand, even though borrowing costs remain low by historic standards and unemployment is at a 40-year low.

Robert Gardner, Nationwide's chief economist, says: “Looking further ahead, much will depend on how broader economic conditions evolve. If the uncertainty lifts in the months ahead, there is scope for activity to pick-up throughout next year.”

He adds: "The squeeze on household incomes is already moderating and policymakers have signalled that interest rates are only expected to raise at a modest pace and to a limited extent in the years ahead.”               

Despite the fall, Nationwide expects house prices to rise by around 1% over the course of 2018.

Housing market continues to struggle

The housing market continues to struggle to gain momentum. According to the latest data from the Bank of England mortgage approvals for house purchases fell to 65,269 in September from 66,101 in August.

Property sales have fallen significantly over the decade since the financial crash, with 1.2 million transactions in the 12 months to September, 30% lower than the levels seen in the same period in 2007.

Howard Archer, chief economic advisor to the EY ITEM Club, expects the housing market to remain lacklustre over the coming months, with the overall national picture dragged down by poor performance in London and parts of the South East.

He says: “It is evident that the housing market is struggling for traction in the face of still limited consumer purchasing power, fragile consumer confidence and wariness over higher interest rates. Brexit uncertainty may also be having some dampening impact on activity.”

Brian Murphy, head of lending at Mortgage Advice Bureau, says some movers are taking a ‘wait and see’ approach at the moment which has meant that the market in some regions is more subdued.

He says: “On the ground in regions such as Yorkshire and the Humber, Scotland, Wales and the Midlands, consumer sentiment with regards property appears to still be very positive and markets are continuing to function very well.

“This has meant that in these areas, property values have seen greater average annual increases than the headline national rate of growth.”

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