Nationwide Reports Small Uptick in House Price Growth

The latest House Price Index from Nationwide reveals a small uptick in annual house price growth, from 2.1% in March to 2.6% in April.

On a monthly basis, the average house price increased by 2.6% from March to April, taking the typical property value across the UK to £213,000, from £211,625 in the previous month.

Robert Gardner, the Chief Economist at Nationwide, comments on the figures: “February saw a softening in house purchase approvals to 64,000 cases, following a surprise rise in January. These figures are broadly in line with our expectations and close to the average for the last three months of 2017. Surveyors continue to report subdued levels of new buyer enquiries and recent months have also seen a softening in new instructions.

“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. We continue to expect house prices to rise by around 1% over the course of 2018.”

So what’s happening with cash buyers? Gardner explains: “The share of cash transactions has declined a little over the past 18 months. This is due in part to the introduction of the additional Stamp Duty levy on second properties, which has impacted the purchase of second homes and rental properties, a large proportion of which tend to be conducted in cash. Nevertheless, cash buyers continue to play an important role in the housing market, accounting for around a third of transactions.

“The significant increase in the share of cash purchases in 2008 was a function of the sharp decline in mortgage transactions, rather than cash transactions increasing. This reflected the impact of tightening credit conditions during the financial crisis and the deterioration in labour market conditions, which reduced the number of people able to buy with a mortgage, while such constraints would have had less of an impact on cash purchasers.”

He continues: “Demographic shifts are also playing a role in supporting the number of cash transactions. As the UK population ages, so the proportion of people who own their home outright has increased, and when these people transact – for example, moving home or downsizing – they are more likely to do so in cash. Indeed, the number of people in England who own their home outright overtook those who own with a mortgage in 2014.

“Our analysis of Land Registry data suggests that the share of cash purchases in London and the Outer Metropolitan regions is below the average for Great Britain. This may reflect the fact that these are the most expensive regions (prices in London are over twice the UK average), which presumably acts as a limiting factor.”

Nationwide Reports Small Uptick in House Price Growth

Gardner explains how property sales have adapted: “There have been significant changes in the pattern of housing transactions over the past decade, beyond the rise in the proportion transacting in cash.

“In recent years, we have seen a recovery in first time buyer transactions, which are now broadly in line with pre-crisis levels. The easing in credit availability, including schemes such as Help to Buy, have helped boost activity. Meanwhile, home mover activity has remained relatively subdued, in part due to the lack of stock on the market. Buy-to-let purchases have fallen as a share of total transactions since 2016, which reflects a softening in demand following tax changes and changes in underwriting standards.”

Comments 

The industry has been quick to respond to the new data – read the experts’ thoughts below:

Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, says: “The market is traditionally in full swing at this time of year, so a softening of approvals and new buyer enquiries is entirely in line with Nationwide’s predictions for 2018.

“This time last year, this index had dropped for a second month and was to go on to fall again in May, with Nationwide saying the market was losing momentum.

“Fast forward to the beginning for 2018 and they have been proved entirely correct, though certain Government measures have increased buying pressure causing a much-needed slowdown and the close of a sellers’ market to drag on.

“Annual gains show growth but, in comparison with inflation, loss of momentum has already turned to house price falls in real terms. The race with inflation for April will be a close run thing, with CPI having posted 2.5% in March. We won’t find this out until the next CPI measure comes out in May.

“Longer term, Nationwide was expecting the market to grow about 1% this year, so the flat price movement we’re seeing reflects that unremarkable outlook and we’re due some further contraction if they are to be proved right once again.”

Russell Quirk, the Founder and CEO of online estate agent Emoov, also reacts: “After two consecutive months of declining price growth, yet another industry source is reporting a positive uplift in house prices. With mortgage affordability coupled with an influx of stock and a seasonal uplift in buyer demand, it’s extremely likely that the market uncertainty caused by previous political influences will now evaporate in the spring sunshine with a renewed optimism in the market.

“Those that have been considering a property sale or purchase, but have remained on the fence due to wider market conditions, should be reassured that the market has turned a corner and will continue to do throughout the remainder of the year.”

The Director of Marketing at Foundation Home Loans, Jeff Knight, gives his comments: “Cities in the north of England are experiencing sustained price growth, adding to the already substantial challenge facing those looking to get one foot on the property ladder and pinning their hopes on a home outside the capital. Even with Stamp Duty cuts and low mortgage rates alleviating some of the pain points experienced by renters and buyers alike, affordability continues to remain a concern for the majority of those looking for their first or second home.

“Quality and availability are further issues needing proper address; housebuilding levels must be improved if the market is to keep up with demand. While rental property developments are meeting demand to an extent, there is still a lot more work to do to solve this issue once and for all.”

Paul Osborn, the Chief Executive for the Foresters Friendly Society, adds: “The real challenge remains affordability – this is certainly the case for first time buyers. However, by being savvy about finances, and by taking advantage of the saving products and linked benefits available, long-term saving goals are much more achievable.

“The Lifetime ISA (LISA), which is designed specifically to help those under 40-years-old and offers a 25% boost to annual savings, is one such option. But our research indicates that, despite strong awareness of the LISA, very few of those eligible are reaping the benefits it offers. Saving early and often is important, but taking advantage of Government incentives such as the LISA can really boost savings and help bring that goal of homeownership within reach.”