Annual House Price Growth Eased to 2.7% in December, Halifax Reports

Annual house price growth eased to an average of 2.7% in December, according to Halifax’s latest House Price Index. This is down on November’s rate of 3.9%.

On a quarterly basis, house prices were up by 1.3%, which is down on the 2.3% recorded in October and November.

Month-on-month, house prices dropped by an average of 0.6% on November, following a 0.3% rise in both October and November. This is the first fall since June 2017.

December’s average property value of £225,021 is 2.4% higher than in January last year (£219,741).

Russell Galley, the Managing Director of Halifax Community Bank, comments: “House prices in the three months to December were 1.3% higher than in the previous quarter; a gradual slowdown from 2.3% in both October and November. The annual rate of growth has also moderated to 2.7%, from November’s 3.9%. Ending the year, house prices in December fell by 0.6%; the first monthly decline in six months.

“As we’d anticipated, the housing market in 2017 followed a similar pattern to the previous year. House price growth slowed, whilst building activity, completed sales and mortgage approvals for house purchase all remained flat. This has been driven by a squeeze on real wage growth and continuing uncertainty over the economy.”

He continues: “However, nationally, house prices in 2018 are likely to be supported by the ongoing shortage of properties for sale, low levels of housebuilding, high employment and a continuation of low interest rates making mortgage servicing affordable in relative terms. Overall, we expect annual price growth to continue in the range of 0-3% at the end 2018.”

The latest sales figures, for November, show that property transactions reached 104,200 – the highest monthly level since March 2016, and a continuation of the trend for sales remaining above 100,000 for all months of 2017. In the three months to November, home sales were 7% higher than in the same period of the previous year.

The number of mortgage approvals – a leading indicator of completed house sales – edged up by 0.4% on a monthly basis in November, to reach 65,139. In the three months to November, approvals were down by 2.1% on the same period a year earlier. For the past 12 months, mortgage approvals have been in the narrow range of 64,900-69,500.

New buyer enquiries appeared a little more stable over the month, having declined sharply in autumn. This measure, however, has now dropped for the past eight months. Turning to supply, new instructions to sell continued to deteriorate at the headline level and have now fallen for 22 consecutive months – the worst sequence for close to eight years.

Annual House Price Growth Eased to 2.7% in December, Halifax Reports

Overall, Halifax expects annual house price growth across the country to stay low and in the range of 0-3% by the end of 2018. The main driver of this forecast is the continuing effect of the squeeze on spending power, as inflation has outstripped wage growth and the uncertainty regarding the prospects of the UK economy next year.

Comments 

Kicking off industry comments on the latest index, Russell Quirk, the Founder and CEO of online estate agent eMoov.co.uk, says: “Like most of us at this time of year, it’s natural that the UK market may be suffering from a degree of lethargy due to the Christmas period. While price growth is likely to remain subdued for the immediate future, the level of sales completions continues to remain robust and, once the market finds its rhythm again, we should see price growth stabilise. Many have been quick to forecast very dark clouds ahead for 2018, but as buyer interest returns to the market over the coming months, I think the outlook will be a lot brighter than predicted.

“The market has weathered the storm of market uncertainty in 2017 and fared much better than many believed it would, so I don’t think the market slowdown over the year ahead will be as exaggerated as some are making it out to be.”

Paul Osborn, the Chief Executive of Foresters Friendly Society, also comments: “Regardless of today’s dip, first time buyers are still facing an uphill battle to get one foot on the housing ladder, with the few that are successful being met with limited choice and sky high prices.

“But progress is being made. Our research suggests that 58% of millennials saving for a deposit are more confident about achieving their goal following the Chancellor’s Stamp Duty changes announced in the last Budget. The key, however, is saving early and in the right way. A product such as the Lifetime ISA, which offers savers a 25% boost to their annual savings, is a great way for those under 40 to save significant amounts towards a home deposit. With this at the heart of their long-term savings plan, young people can bring that homeownership goal much closer.”

The Founder Director of independent estate agent James Pendleton, Lee James Pendleton, gives his thoughts on the figures: “Even in the winter month of December, the UK housing market failed to suffer frostbite, but prices did continue to gently chill.

“Anyone hoping for a Santa Rally thanks to the Chancellor’s Stamp Duty exemption for first time buyers will have been disappointed. In fact, instead of positive pressure on prices, the opposite is happening for those homes priced at just over £500,000, as vendors are forced to follow the crowd below the threshold where they are picking up their tax break.

“For those able to capitalise, it was an early Christmas present that looks set to keep on giving throughout 2018.”

Ishaan Malhi, the CEO and Founder of online mortgage broker Trussle, adds: “The slowdown of price growth last year won’t have been welcomed by existing homeowners and buy-to-let landlords. But, for those looking to get on the property ladder, it’s good news. With the continued pressure on household incomes, it’s unlikely that we’ll see significant growth in prices this year, so 2018 could be a good time to buy for those that already have some savings set aside.

“As well as benefitting from weakened price growth, many new buyers will benefit from the Stamp Duty changes introduced in the Autumn Budget. They should also still be able to lock in a low rate mortgage, before interest rates inevitably creep further up in the coming months and years.”

Nationwide released its latest House Price Index for December last week. Compare the figures here.