UK house price growth falters
The Nationwide building society has reported on the latest house price growth figures. The latest House Price Index shows that average prices have grown by 2.6% over the past 12 months.
The figures show a slowdown in growth from the 4.5% recorded in 2016 and 2015, with London prices actually falling, by 0.5%.
The Nationwide said, that while prices are slowing, there are still significant differences in regional affordability, and saving for a deposit is the most challenging aspect for people.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “Annual house price growth ended the year at 2.6%, within the 2-4% range that prevailed throughout 2017. This was in line with our expectations and broadly consistent with the 3- 4% annual rate of increase we expect to prevail over the long term (which is also our estimate for earnings growth in the long run).
“However, this marked a modest slowdown from the 4-6% rates of house price growth recorded in 2016. Low mortgage rates and healthy employment growth continued to support demand in 2017, while supply constraints provided support for house prices. However, this was offset by mounting pressure on household incomes, which exerted an increasing drag on consumer confidence as the year progressed.”
Analysts are predicting a similar story for 2018, with a continued slow down in price, and the economic squeeze unable to offset first-time buyers’ gain on stamp duty.
Mr Gardner continued: “How the housing market performs in 2018 will be determined in large part by developments in the wider economy. Brexit developments will remain important, though these remain hard to foresee.
“We continue to expect the UK economy to grow at modest pace, with annual growth of 1% to 1.5% in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.
“Over the longer term, once the economy regains momentum, we expect house prices to rise broadly in line with earnings (around 3%-4% per annum), though if the rate of house building fails to keep up with population growth, prices may outpace earnings once again, as they have in recent years. “As noted above, the UK housing market has been characterised by significant regional disparities in house prices in recent years and it is not clear how Brexit will impact these dynamics. Much will depend on the nature of the Brexit impact on the UK economy (in terms of its impacts on different sectors and the resulting geographic consequences).”
The figures follow on from the RICS annual housing market forecast, which shows a flat national prediction for 2018.
RICS agree that house price growth in the UK will likely come to a halt over the course of next year as the number of transactions reduces slightly. The RICS UK Market Survey has recently shown buyer enquires stalling, sales volumes stagnating and sentiment turning altogether more cautious as a result.
“2017 was meant to be the year of a Government step-change in housing policy, but it seems we’ll have to wait a little while longer for anything truly transformative to drive up supply. While there have been some policies, such as the recognition of the role of councils in building homes which RICS have long called for, and the package of reforms to support SME builders that should make a change in the market, many of these measures won’t come into effect until the mid-2020s and as our 2018 forecast indicates, they don’t add up to the kind of resolute, large-scale supply strategy we need.
“If they are to fundamentally shift the narrative on housing in 2018, Ministers need to both introduce some new ideas and be much bolder on the positive but tentative moves they’ve made in 2017. The lifting of the borrowing cap for councils should be brought forward, alongside a much larger package of measures for direct commissioning, and in addition to Oliver Letwin’s review of unused planning permission, there needs to be a much broader rethink of the planning system.” Lewis Johnston, RICS Parliamentary Affairs Manager.
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