Property prices in the UK fell slightly by 0.3% in February to an average of £210,402 with annual growth also down at 2.2%, the latest lender index shows.
But overall housing market activity is expected to slow only modestly as unemployment and interest rates remain low by historic standards as high demand and low supply keeps the market going, according to the report from the Nationwide.
The lender is predicting that house prices will be broadly flat, with a marginal gain of around 1% over the course of 2018. ‘How the housing market performs in the year ahead will be determined in large part by developments in the wider economy and the path of interest rate,’ said chief economist Robert Gardner.
‘Brexit developments will remain a key factor, though these remain hard to foresee. We continue to expect the UK economy to grow at modest pace, with annual growth of 1% to 1.5% in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth,’ he added.
But experts are warning that even with a flat market affordability for first time buyers will remain challenging, especially in London. ‘Many face the likelihood of having to relocate outside the capital. Purchasing a property in today’s market can leave many feeling exhausted and disheartened by the process,’ said Jeff Knight, director of marketing at Foundation Home Loans.
Jeremy Duncombe, director of the Legal & General Mortgage Club, agrees. ‘Competitive mortgage deals and Government schemes should give more and more would-be buyers the opportunity to step onto the property ladder. Affordability, is however still a main cause for concern particularly for buyers in the South and South East,’ he pointed out.
Limited supply is continuing to act at a bottleneck, squeezing many potential buyers out of the market, according to Richard Sexton, director of e.surv. ‘Saving for a deposit is one of the biggest challenges would-be home owners face, particularly for those in the capital,’ he said.
The firm’s most recent mortgage monitor showed that only 17% of loan approvals went to borrowers with small deposits in London. ‘Although we have seen a commitment from the Government to address our housing crisis with an exemption of stamp duty for first time buyers, only time will tell if this has been enough to fully support them,’ he added.
