Residential property prices in the UK continued to grow in October, up 1.4% and are now 5.2% up year on year, taking the average cost of a home to £217,411, the latest lender index data shows.
On a quarterly basis they were up just 0.1% but experts point out that this reflects a slowdown caused by the political uncertainty around the referendum in June on the UK’s membership of the European Union.
There was concern that the vote to leave the EU might be catastrophic for the housing market and the annual rate is down from a peak of 10% in March but Halifax Housing economist Martin Ellis pointed out that a slowdown was not unexpected and there are factors other than Brexit.
‘Annual house price growth has nearly halved from a peak of 10.0% in March this year, but remains robust at 5.2%,’ he said, but added that the slowdown appears to have been largely due to mounting affordability pressures, which have increasingly constrained housing demand.
He also pointed out that activity levels, like house price growth, have softened compared with a year ago. ‘Home sales, however, appear to have stabilised in recent months following the distortions earlier in the year due to the changes to stamp duty in April,’ he explained.
‘Whilst house price growth may ease further in the coming months, very low mortgage rates and a shortage of properties available for sale should help support price levels,’ he added.
Mark Posniak, managing director of Octopus Property, believes that the market is proving to be more resilient than anticipated. ‘In a politically and economically uncertain time, both at home and overseas, the resilience of the UK property market will certainly be tested. Demand may well be down amid such uncertainty, but as the latest mortgage approvals statistics reveal, it’s by no means out,’ he said.
‘The low cost of borrowing, weak supply levels and a robust jobs market are preventing prices from falling more sharply. Confidence is likely to play an increasingly prominent role in the short to medium term,’ he pointed out.
‘As inflation rises, people will feel less well-off and will become more cautious, and this could result in subdued transaction levels. Brexit related uncertainty remains the key narrative for the UK housing market at present, and last week’s high court ruling on Article 50 could see that uncertainty prolonged for longer than anticipated,’ he added.
Randeesh Sandhu, chief executive officer of Urban Exposure, also thinks the court ruling could have an effect as continued uncertainty about the Brexit process could hit confidence but at the same time there is still more demand than supply.
‘We still view the overall UK housing market picture as positive in light of enduring supply and demand fundamentals and no sign that the government will halt its long term support of the sector. There are a number of issues that must be remedied on the supply side if the UK is to meet the government’s building targets, so in parallel we see opportunities for continued growth as and when these opportunities are unlocked,’ he concluded.
