UK House Price Growth Remained Weak Last Month

While UK house price growth rose slightly in April, it remains weak on both a monthly and annual basis, according to Nationwide’s latest House Price Index.

UK house price growth stood at an average of 0.4% in the month to April, which is up from 0.2% in the previous month.

Year-on-year, the average UK house price increased by 0.9% in April – up from 0.7% in the year to March. This takes the typical property value to £214,920, which is higher than the £213,102 recorded in the previous month.

Robert Gardner, the Chief Economist at Nationwide, explains the figures in more detail: “UK house price growth remained subdued in April, with prices just 0.9% higher than the same month last year.

“Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, even though survey data suggests that sentiment has softened.

“Measures of consumer confidence weakened around the turn of the year and surveyors report that new buyer enquiries have remained subdued.

“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. April marks the fifth month in a row in which annual house price growth has been below 1%.”

However, first time buyer numbers are recovering.

Gardner says: “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.

“Indeed, the number of mortgages being taken out by first time buyers has continued to approach pre-financial crisis levels in recent months.

“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. Indeed, raising a deposit appears to be the major barrier for prospective first time buyers, since the cost of servicing the typical mortgage remains in line with or below long-run averages as a share of take-home pay in most regions of the UK.

“The exception is in London and parts of the south of England, where affordability pressures are more acute, and the monthly cost of servicing a mortgage, as well as raising a deposit, poses a greater challenge. 

“Indeed, comparing the incomes of actual first time buyers in 2018 with average incomes in each region highlights how affordability pressures vary across the UK. 

“In 2018, first time buyer incomes were in line with or below average incomes in most regions. However, in the East, South East and London, first time buyers’ incomes were significantly higher than average incomes in those regions (60% higher in London), illustrating the extent to which many prospective buyers are priced out of the market in those areas.”

Comments

Guy Harrington, the CEO of specialist property lender Glenhawk, is pleased to see first time buyers returning to the market: “The good news is that first time buyers are wading back in and hopefully picking up some good value stock. We need to end the perception, perpetuated by these reports, that the market is weak, and get used to stagnant house prices, not the rocket ship growth we have had in previous decades, which was simply just not sustainable.”

Conor Murphy, the CEO of mortgage advisor software Smartr365, agrees that slower UK house price growth is understandable: “Patchy house price growth is expected as the market continues its recent subdued performance. We could see transaction volumes increase as we move into the summer, however, as we approach one of the seasonal activity surges that have been a characteristic part of the UK property market in the past.”

Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, is concerned that the market is relying on first time buyers: “At this point in the country’s property diary, the market has had a month to get used to Britain abandoning its abandonment of the EU. The pace of the housing market, however, remains the same. 

“The run of play is still slightly in the favour of buyers, but it is only really a buyers’ market in any real sense in London and pockets of the South East. 

“A lot of the activity supporting prices is being driven by first time buyers around the UK, their pockets still filled with Government cash encouraging them to transact. 

“What estate agents would like to see is a broadening out of demand and less dependency on this group. That’s happening to an extent in London, where prices have fallen significantly compared with the rest of the country over the last year.

“Any rebalancing in favour of owner-occupiers will point to better stock levels and more realistic pricing, both of which are better for the housing market in the long-run.”