UK house price growth remains subdued in April as first-time buyer mortgages approach pre-crisis levels

Published by Stephen Little on 01 May 2019.
Last updated on 01 May 2019

Housing market is ‘resilient’ – but sellers need to be ‘pragmatic’

UK house price growth rose slightly last month but the market still remains subdued, new figures show.

Annual house price growth edged up by 0.9% in April - up from 0.7% the previous month, according to the latest Nationwide House Price Index.

On a monthly basis, house price growth fell by 0.4% in April, taking the average UK house price to £214,920.

This is now the fifth month in a row in which annual house price growth has been below 1%.

Nationwide says that despite the uncertainty surrounding Brexit, this does not seem to have put off first-time buyers, who have been helped by a strong labour market and low mortgage rates.

Robert Gardner, Nationwide's chief economist, says: “While the number of properties coming onto the market has also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of supply and demand in favour of buyers in recent months.

“While the ongoing economic uncertainties have clearly been weighing on consumer sentiment, this hasn’t prevented further steady gains in the number of first-time buyers entering the housing market in recent quarters."

Data from Nationwide shows that the number of mortgages being taken out by first-time buyers is approaching pre-financial crisis levels.

Mortgages taken out by first-time buyers since 2006

Mr Gardner points out that raising a deposit still appears to be the major barrier for prospective first-time buyers, with mortgage payments below long-run averages as a share of take-home pay in most regions of the UK.

The exception to this is in London and parts of the south of England where affordability pressures are more acute, with mortgage payments accounting for over 50% of pay.

Mr Gardner says: “First-time buyer numbers have been supported by the strength of labour market conditions, with employment rising at a healthy rate, and earnings growth slowly gathering momentum.

“While house prices remain high relative to average earnings, low mortgage rates have helped to support mortgage affordability.”

Outlook for house prices

Howard Archer, chief economic adviser at EY ITEM Club, says despite prices picking up in April, conditions still look “challenging” for the housing market.

He says: “It is possible that the avoidance of a no-deal Brexit at the end of March could provide a modest boost to the housing market by easing some of the immediate uncertainty and concerns.

“However, we suspect it is more probable that, with Brexit most likely being delayed until a flexible deadline of 31 October, prolonged uncertainty will weigh down on the economy and hamper the housing market.

“Consumers may well be particularly cautious about committing to buying a house, especially as house prices are still expensive relative to incomes.”

Andrew Montlake, director of the mortgage broker Coreco, says: “Sellers may look at these latest house price figures with a sense of dismay but for prospective buyers, market conditions have rarely been as good.

 “It’s a buyers’ market right now, with a cherry on top. First-time buyers are driving a significant chunk of the activity in the market at present, especially those given a helping hand by the Bank of Mum and Dad, or Gran and Grandad.”

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