House prices drop 2nd month in row

The residential property market in the UK is cooling with the latest index showing that prices have dipped for the second month in a row and annual growth is at its weakest since 2013.

The data from lender the Nationwide shows that prices were down 0.4% month on month in April and year on year growth is now 2.6%, down from 3.5% in March, taking the average price of a home to £207,699.

But it must be remembered that the figures refer only to Nationwide customers and not to the nation as a whole. Suggestions that it is due to a general election being called are perhaps premature as the figures cover the weeks before the announcement.

But it is clear that price growth is slowing and some might say that is not a bad thing but others have expressed surprise that it is happening at during the normally busy spring market. It might also be that sellers are being more realistic about what price they can get and buyers are driving a hard deal.

‘In some respects, the softening in house price growth is surprising because the unemployment rate is near to a 40 year low, confidence is still relatively high and mortgage rates have fallen to new all-time lows in recent months,’ said Robert Gardner, Nationwide’s chief economist.

‘While monthly figures can be volatile, the recent softening in price growth may be a further indication that households are starting to react to the emerging squeeze on real incomes or to affordability pressures in key parts of the country,’ he added.

Alex Gosling, chief executive of online estate agents HouseSimple, pointed out that it was widely predicted that 2017 would be a difficult year for the property market. ‘If we were seeing a house price growth soften during a traditionally quiet period for buying and selling then this could be overlooked, but we are now in the middle of the spring market when we expect to see activity pick up,’ he said.

‘We do have to remember though that the market has faced the invoking of Article 50 and now a snap general election. People’s buying and selling decisions are underpinned by confidence, and at the moment they are facing a huge amount of uncertainty with is inevitably going to dent confidence,’ he explained.

‘There’s every chance the market will cool further in May as buyers and sellers hold off making a decision until after 08 June. But then it’s very likely we will see a late spring bounce after the election. We need to remember that two months of negative price growth doesn’t constitute a property crash. A lack of supply is still supporting prices and mortgage rates remain extremely low,’ he added.

Affordability issues and rising inflation could also be factors in the current slowdown, according to Jonathan Samuels, chief executive officer of specialist property lender, Octane Capital but he also feels that there is a lack of excitement in the property market at the moment.

‘The shortage of properties for sale has almost certainly caused a lot of prospective buyers to lose interest. Search for homes to buy in many areas of the country and all you see is same old thing. Even though people overall are confident in their jobs and can access extremely low mortgage rates, we shouldn’t underestimate the impact of an absence of choice. The general election has the potential to make the market even more lethargic in the next month or two but there’s a chance of an uplift in transactions and interest, on behalf of buyers and sellers alike, once the result is in,’ he said.

‘Even then it’s likely activity levels will remain conservative until there is greater clarity on the outcome of ongoing Brexit negotiations. The property market is by no means in crisis, but for it to start hitting its stride again there needs to be a material increase in supply, and choice,’ he added.

According to Sundeep Lakhtaria, director of residential financier Urban Exposure, believes that sound economic fundamentals will keep the property market going. ‘The UK continues to demonstrate robust economic fundamentals, with the International Monetary Fund earlier this month upgrading its UK growth forecasts to 2% for this year and there are currently record lows in UK employment and mortgage rates,’ he pointed out.

‘So we are therefore optimistic there is further growth ahead for UK housing, even if this growth is gentle over the short term,’ he added.

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Written by: Houseladder