House price growth crashes to 5 year low

The latest data released by ONS has revealed that annual house price growth is at its lowest level since August 2013. According to the figures average house prices in the UK increased by 3.0% in the year to June 2018 - down from 3.5% in May.

Related topics:  Property
Warren Lewis
15th August 2018
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"For the capital to be in a photo finish with the North East over the past year is a stark reminder of how volatile the UK property market can be in the short term"

ONS revealed that the slowdown in UK house price growth over the past two years is driven mainly by a slowdown in the south and east of England. The lowest annual growth was in London, where prices decreased by 0.7% over the year, down from -0.2% in June and its lowest annual growth rate since September 2009 when it was negative 3.2%.

At the other end of the scale, the West Midlands showed the highest annual growth, with prices increasing by 5.8% in the year to June 2018, followed by the East Midlands with growth of 4.1%.

On a seasonally adjusted basis, average house prices in the UK were unchanged between May 2018 and June 2018, compared with an increase of 0.5% in average prices during the same period a year earlier.

Russell Quirk, founder and CEO of Emoov.co.uk, said: “Yet more mixed signals for the UK property market which won’t inspire much confidence in those who remain undecided on whether or not to buy or sell this year.

Price growth remains at a five-year low and this is a direct result of a fall in transactions and a lethargic market, as demonstrated by the increase in the time it’s taking to sell.

However, the positives to take are that prices are still climbing, albeit slowly, the level of stock entering the market is also picking up the pace and the number of mortgage approvals is up as well. These positive uplifts on all fronts of the market are proof that the glass is still very much half full and this activity should continue to build over the coming months.

It’s important to remember that for those in the likes of Torfaen, Sandwell, North Norfolk, West Lothian and more, the idea of a market slowdown is almost laughable as homeowners are enjoying double-digit annual price growth, largely due to more realistic market expectations and higher levels of affordability. So it's not all doom and gloom and those looking to buy or sell should take any top line figures for the UK with a pinch of salt and focus on the local market conditions in their backyards.”

John Goodall, CEO and co-founder of Landbay, commented: “House price growth has dropped down another gear. As the housing market continues to let off steam in the face of fragile consumer confidence, the market is struggling to gain momentum. For most the cost of living remains high, compounded by flat wage growth and a period of high inflation. While the Bank of England’s recent interest rate rise adds further pressure to household finances, we don’t expect the cost of borrowing to alter significantly.”

Jeremy Leaf, north London estate agent and former RICS residential chairman, added: "Although a little out of date, these numbers represent the most comprehensive survey of UK house prices. House price growth outside of London is being supported by a continuing shortage of stock whereas the capital and the southeast can’t hide behind this excuse any longer. Price drops are continuing and reflect a new realism in the market - if you want to sell your property, it needs to stand out and price is the obvious way of doing it.

Nevertheless, we are seeing more interest in property coming on the market as buyers can only hold off for so long and realistic sellers are recognising the changed market conditions. This is an encouraging sign and hopefully will be reinforced when many of those currently on holiday return to bolster the traditionally busier Autumn market."

Alan Collett, fund manager at TM home investor fund, comments: “Whilst the current political uncertainty creates a somewhat subdued market in terms of transactions and valuations, as the ONS House Price Index data suggests, regional variations in house price growth continue to create opportunities for buyers. We have recently completed on properties in the East Midlands and East of England where we expect prices to continue to increase above the average for the country as a whole. In addition, the recent base rate rise should not adversely impact the outlook for house prices.

Periods of rising interest rates tend to be associated with periods of economic growth, which generally support house price growth, so property markets have historically been able to absorb rate rises with the economic cycle over-riding the effects of interest rate rises alone.

Residential property investors also benefit from rental income returns as well as capital growth, which has proven to be resilient across all economic cycles. In line with the ONS rental index, our rental income remains stable. Three newly acquired homes in Nottingham were reserved by tenants within two weeks of the sale completion and six properties in Colchester bought in mid-June are already occupied.

There is a continued need for good quality homes, alongside a shortage in supply due housing building not keeping pace with demand for housing and some smaller scale landlords leaving the market due to Buy to Let tax changes, pointing to a positive outlook for the private rental sector.”

Jonathan Samuels, CEO of Octane Capital, said: "That the annual growth rate in London is at its lowest level since September 2009, when the UK economy was reeling from the Global Financial Crisis, underlines the weakness of the capital's property market.

The London property market has gone from hero to below zero in a matter of a few years. For the capital to be in a photo finish with the North East over the past year is a stark reminder of how volatile the UK property market can be in the short term. There's a widespread caution in the property market at present, caused by the uncertainty of Brexit and the ongoing squeeze on household income, as revealed by the latest July inflation data.

Households are wary of taking on more debt, all the more so following the recent interest rate rise, which could further undermine sentiment.

The jobs market might be holding up but if inflation maintains its grip on UK households, it's hard to see much improvement in the UK property market during the rest of the year. As for 2019, a no-deal Brexit could wreak further havoc amid UK bricks and mortar."

Andy Soloman, Yomdel, says: “While the rate of annual growth remains at a low there are further signs of house price growth stability with another monthly uplift, signs that should help bring a renewed confidence to the wider economy in time.

UK buyers will still be very much on the fence in the current market climate, but a lift in the number of instructions for the second consecutive month shows promise for the year ahead. As long as these instructions lead to actual completions.

It will be interesting to see if this trend persists over the coming months and if the recent increase in interest rates plays a part. We’ve already seen a decline in the number of mortgage approvals in previous months and a further increase in the cost of borrowing may exacerbate this.”

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