Annual house price growth in the first quarter of 2019 stood at just 0.4%, according to the latest house price index figures from Nationwide – way below the annual growth rate of 2.5% seen at the same point in 2018.
Behind the headline figure were sharp regional differences. Growth was dragged down most by figures for London and the South East. Iain McKenzie, chief executive at the Guild of Property Professionals, says: “Regional influences are extremely significant here.”
According to Robert Gardner, Nationwide’s chief economist: “London was the weakest region in the first quarter of 2019, with annual price growth 3.8% lower than in the first quarter of 2018 – the fastest decline since 2009 and the seventh consecutive quarter in which prices have declined in the capital.”
To put that in context, between the first quarters of 2017 and 2018, London prices fell by just 1%.
This weakness fed into wider south-eastern regions. Price growth in the first quarter of 2019 fell by 2% in Greater London and 1.1% in the South East compared with the same quarter in 2018.
Behind this sluggish price movement lies Brexit. Guy Gittins, managing director at Chestertons, says: “It was almost inevitable that Brexit uncertainty would drag property prices down.” He adds that many buyers have been adopting “a wait-and-see approach.”
Sam Mitchell, chief executive at Housesimple, notes that sellers and buyers, primarily in London, have been holding off from making decisions until the Brexit outlook becomes clearer.
He says: “The market would have preferred a decision one way or the other. Instead, we are now in limbo, leaving many buyers and sellers unsure what to do.”
Mitchell argues that Brexit is likely to depress price growth for the foreseeable future, or at least until Brexit uncertainty is resolved. He points out that, typically, transaction levels increase at this time of the year – “the traditional spring bounce period”.
However, with the extension of the Brexit date to the end of October, the bounce is likely to be more subdued this year.
London’s stagnant market is also the fallout from several years of strong growth. Affordability remains a problem, particularly for first-time buyers, as London house prices are still 50% above their 2007 peak.
Gardner notes that London’s poor performance should have been expected, as it followed several years of sustained price rises that left potential buyers behind.
At the same time, increased regulation of the buy-to-let market took its toll in London, says Gardner.
The private rental sector accounts for a larger percentage of housing stock in the capital than it does anywhere else in the UK, so the decline in profitability for landlords (and therefore in demand for buy-to-let properties) hit the region disproportionately.
In contrast, the Midlands and the North saw relatively strong growth. In the first quarter of 2019, annual price growth in the East Midlands stood at 2.6%, in the West Midlands it was 2.5% and in the North West it was 2.9%, relative to the first quarter of 2018.
The strongest price growth was in Northern Ireland, where annual growth in the first quarter of 2019 was up 3.3%.
This article first appeared on our sister website Money Observer