House prices drop by 2.9% in a month but resilient jobs and wages stop them falling further, says Halifax

Published by Edmund Greaves on 07 February 2019.
Last updated on 07 February 2019

Brits’ obsession with housing wealth ‘could make us poorer’

House prices fell by 2.9% in January and grew by just 0.8% over the year, new figures from Halifax reveal.

Political uncertainty is weighing on prices as it puts people off making big decisions resulting in a subdued market. However, a resilient jobs market and wage growth are keeping the market from falling harder, says Halifax.  

The figures in Halifax bank’s latest house price index show 0.8% growth year-on-year for house prices.

Quarterly UK house prices have now fallen 0.6% according to the bank.

Source: Halifax, 7 February 2019

While -2.9% is a significant drop for prices, Halifax is keen to note this is likely due to discounting from sellers who failed to sell in December.

Russell Galley, managing director at Halifax, says: “Attention will no doubt be drawn towards the monthly fall of -2.9% from December to January, the second time in three years that we have seen a drop as a new year starts. However, the bigger picture is actually that house prices have seen next to no movement over the last year, with annual growth of just 0.8%.

“This could either be viewed as a story of resilience, as prices have held up well in the face of significant economic uncertainty, or as a continuation of the slow growth we’ve witnessed over recent years.”

 Jonathan Hopper, managing director of Garrington Property Finders, agrees: “January is often a tough month, in which sellers who have failed to shift their home in the previous year typically cut the price in order to drum up interest.

“But seasonality gives only a slight sugaring to the bitterness of the Halifax’s data. Both the month-on-month fall and the quarter-on-quarter fall in prices will trigger sharp intakes of breath."

Resilient job and wages keeping property afloat

Market watchers agree that the only thing preventing greater falls in property prices is the underlying resilience of the economy and continued jobs and wage growth.

Mr Galley notes: “On the demand side we see very high employment levels, improving real wage growth, low inflation and low mortgage rates. All positive drivers tempered by the challenges of raising deposits. On balance therefore we expect price growth to remain subdued in the near term.”

Mr Hopper says: “The irony is the UK’s economic fundamentals remain solid: a higher proportion of Britons than ever are in work, average wages are rising at a decent clip and mortgages are cheap.

“But the confidence-sapping uncertainty of Brexit it getting worse, not better, and the next few months will be decisive. Barring an improbable Brexit solution that magically avoids both economic and political turmoil, a return to universally rising prices appears unlikely any time soon.”

Jonathan Samuels, chief executive of the property lender Octane Capital, adds: “The property market is being kept afloat, just, by the resilient jobs market, improved wage growth and low borrowing rates, but a chaotic exit from the EU could see what little confidence there is left go up in smoke.

“The Halifax are quite right that perspective is all-important when reading into these figures. Some will see them as proof of the property market’s resilience, others of its impending collapse.”

Finally, Lucy Pendleton, founder director of independent estate agents James Pendleton, says: “The long-term holding pattern in prices ahead of Brexit is abundantly clear and overall measures of consumer confidence have been scraping five-year lows.

“However, if the UK does enjoy a good EU exit, then a relief rally could be in store given the plentiful government support for buyers, cheap borrowing and rising wages coupled with low supply.”

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