House prices rise by just 0.5% in a year as London’s buyer’s market ripples out to drag down the South East
House prices rose by just 0.5 per cent over the past year, as the buyer’s market in London and the South East dragged the national average down, according to Nationwide.
House price growth remained below 1 per cent annually for the seventh month in a row in June, according to the building society’s latest house price index.
Britain’s biggest building society said the average house price edged up 0.1 per cent between May and June, to £216,515 – reversing the previous month’s 0.2 per cent decline.
The sluggish London property market picked up slightly, as buyers took advantage of lower asking prices and expectations, but the ripple effect out from the capital means that house prices are falling by a greater amount in the South East and Outer Metropolitan areas.
Nationwide chief economist Robert Gardner said that buyer enquiries and consumer confidence have remained ‘subdued’ in recent months, and warned that wider economic uncertainty would continue to take its toll on the housing market.
‘While healthy labour market conditions and low borrowing costs will provide underlying support, uncertainty is likely to continue to act as a drag on sentiment and activity, with price growth and transaction levels remaining close to current levels over the coming months,’ he said.
House prices are strongest in Northern Ireland and Wales at the moment, with annual climbs of 5.2 per cent and 4 per cent recorded, respectively. In Scotland prices are up 0.4 per cent.
Prices in England, however, remain flat, with price falls in London, its commuter belt and the South East balanced by price growth in northern regions – a trend that has now been seen for some time.
London’s house prices decline has moderated, however, as buyers return to the market to take advantage of subdued conditions.
London house prices fell 0.7 per cent in the year to June – the eighth consecutive quarter of declines – but a considerable improvement on the 3.8 per cent annual drop seen three months earlier.
In the Outer Metropolitan area house prices fell 1.8 per cent in the year to June, while in the South East they fell 1.6 per cent.
House prices in London remain at double their level in the run-up to the financial crisis in 2007, said Nationwide and on its index average prices are just 5 per cent off the 2017 high.
The best performing region was Yorkshire & Humberside, where prices rose by 3 per cent compared to the same quarter last year.
Lucy Pendleton of estate agents James Pendleton said it was no coincidence that price growth remained below 1 per cent on the third anniversary of the Brexit vote.
‘Growth has been slowing steadily ever since the summer of 2016 as political upset has trimmed people’s risk appetite.
‘The Bank of England has predicted second quarter economic growth to be zero and, for all the talk of a healthy labour market and low borrowing costs, weak growth in the property market still mirrors that overall.
‘The broad brush stroke of the UK property market seems to be slipping inexorably towards zero growth too right now.’
Mortgage rates remain near record lows and wages are increasing at 3.4 per cent annually, according to the ONS. These factors should support the market but Brexit uncertainty will continue to affect potential buyers, analysts suggest.
Howard Archer, chief economic adviser at the EY Item Club, said that prolonged Brexit and political uncertainty will weigh down on the economy and hamper the housing market.
‘Consumers may well be particularly cautious about committing to buying a house, especially as house prices are relatively expensive relative to incomes.’
Outside of London and the South East, however, the picture remains brighter for those trying to buy and sell.
With prices rising gently and household finances improving, those wanting to move home will find things easier, say estate agents.
Mike Scott, property analyst at estate agent Yopa, said there was no sign of a ‘widespread downturn’ in prices.
‘We expect that the second half of the year will see continued steady but slow growth,’ he said.
‘London and especially South East England may still have further to fall, but unless the wider economy takes a turn for the worse there is little risk of any significant house price falls outside the overheated South East corner of the country.’