"London’s property market shows no sign of giving up its wooden spoon, as the slowdown in the capital worsens."
According to the figures, UK annual house price growth heald steady at 2.1% with the capital once again being the weakest performing region - house prices down 1% against the year in London.
Robert Gardner, Nationwide's Chief Economist, had this to say: “UK house price growth remained broadly stable in March at 2.1%, little changed from the 2.2% recorded the previous month. House prices fell by 0.2% over the month, after taking account of seasonal factors.
On the surface, the relatively subdued pace of house price growth appears at odds with recent healthy rates of employment growth, a modest pick-up in wage growth and historically low borrowing costs. However, consumer confidence has remained subdued, due to the ongoing squeeze on household finances as wage growth continues to lag behind increases in the cost of living.
Looking ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. Subdued economic activity and the ongoing squeeze on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year.
But historically low unemployment and mortgage interest rates together with the lack of properties on the market is likely to provide some support for house prices. Overall, we expect house prices to be broadly flat, with a marginal gain of around 1% over the course of 2018.
North-South divide narrows……a little
For the fourth quarter in a row, regions in the North of England recorded stronger annual house price growth than those in the South.
Over the past two years the Southern English regions have seen a steady deceleration in price growth, which is now running at its slowest pace since 2012. By contrast, the Northern English regions have recorded a gradual acceleration and recorded their strongest growth rate since 2014 in the first three months of this year
Russell Quirk, founder and CEO of Emoov.co.uk, commented: "Where house price growth is concerned, we seem to currently be in a state of property market limbo and this will no doubt last until our departure from the EU is finalised, if not a little while longer.
While we aren't seeing the more positive upward growth trends UK homeowners have come to expect of property values over the last few years, the good news is that we still haven't seen the disastrous market crash that many have prophesied, and it is very unlikely that we will.
The Easter weekend tends to act as the gateway to the spring selling season and traditionally brings an influx of market activity. While buyer demand remains somewhat subdued, market performance over the coming months will be the real indicator as to the wider health of the UK property market."
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "This is another example of what we have seen in other surveys and on the ground - of higher and still rising prices in northern areas in contrast with London and the south east. Prices in the latter are turning negative as buyers and sellers come to terms with new market realities.
Fewer forced sellers and less dependency on mortgages means that the level of price falls is staying low. This pattern began in early 2015 in response to higher stamp duty, tax changes, affordability and Brexit uncertainty, despite lower interest rates and unemployment. There is a long way to go but if this price drift downwards continues, the north/south divide will continue to narrow, although there is no sign of any larger market correction at present.'
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: ‘With the minutes from the Monetary Policy Committee meeting showing a 7-2 split in voting in favour of a rise in base rate, and noises coming from Threadneedle Street becoming increasingly hawkish, an interest rate rise looks increasingly likely for May. This will not help an already subdued housing market, with people more likely to think twice about taking on a big mortgage and moving, if it is going to cost them more.
Thankfully, mortgage rates are still relatively cheaply priced as lenders compete for business but if a rate rise is on the cards, they are unlikely to stay this low forever."
Jonathan Samuels, CEO of the property lender, Octane Capital: "March’s flurry of upbeat economic news wasn’t enough to shake the property market out of its torpor.
Price growth remains stuck in its ‘two steps forward, one step back’ pattern, and few buyers or sellers currently share the Chancellor’s Tiggerish bullishness. That said, the economic backdrop remains benign – with the cost of living squeeze finally easing as consumer price inflation falls and average wage growth slowly catches up.
With the Bank of England now widely expected to notch up interest rates in May – and possibly again later in the year – the threat of rising mortgage costs could prompt more would-be buyers to commit. With one year to go until the UK formally leaves the EU, Britain’s housing market remains much like its Brexit negotiations – finely balanced and making painstakingly slow progress.”
Jonathan Hopper, managing director of Garrington Property Finders, comments: “London’s property market shows no sign of giving up its wooden spoon, as the slowdown in the capital worsens.
What began as a cooling of prices in the capital’s prime and super-prime postcodes is turning into an ever more widespread frost. Nevertheless, this is far from a frozen market. The correction in prices helped buyer sentiment pick up a touch at the start of the year, and this has created a more free-flowing market as a steady stream of would-be buyers decide that it’s now or never.
The prospect of interest rate rises – which could come as early as May – is also likely to provide an extra nudge to those who had been sitting on the fence.
Meanwhile, behind the scenes there has been a shift in the buyer-seller power dynamic. The experience of 2017 – especially in prime areas – has forced sellers to radically adjust their price expectations, and the new properties that come onto the market tend to be much more sensibly priced. This in turn is requiring buyers to adjust their approach. While last year a committed and well-informed buyer could ask for, and get, very sizeable discounts, newly listed homes tend to have the discounts priced in.
With average wages now rising, the combination of more sensible property prices and the final months of rock-bottom mortgage deals should keep the flow of deals up, even if price growth will remain modest for much of the country in 2018.”
Jeff Knight, Director of Marketing at Foundation Home Loans, commented: “The first quarter has been typically sluggish – typically a period when buyers and sellers contemplate their next move. While there is talk of a cooling London market and narrowing north-south price divide, let’s look at the bigger picture: prices are holding and, particularly for those first-time buyers, affordability remains an issue. Even with those benefiting from stamp duty cuts and low mortgage rates, the lack of supply remains the nagging problem.
It’s imperative more is done to support not only those seeking a first or second home but also those seeking rented accommodation to tide them over. Minimal choice, poor standards and unaffordable prices risk many feeling alienated in the market and in time will impinge future activity.”
