There are further signs that the housing market in the UK is softening with the latest index showing that annual growth fell to 1.9% in May from the 2.2% recorded in the previous month.
But house prices were up 1.5% month on month to an average of £224,439, according to the data from lender the Halifax. This partially reversed the 3.1% monthly decline recorded in April.
Russell Galley, Halifax managing director, pointed out that currently the month on month figures are more volatile than the quarterly or annual measures. In the three months to May house prices were 0.2% higher than the previous quarter and on an annual basis they are 1.9% higher but both of these measures have fallen since reaching a recent peak, in the final months of last year.
‘These latest price changes reflect a relatively subdued UK housing market. After a sharp rise in January, mortgage approvals have softened in the past three months. Whilst both newly agreed sales and new buyer enquiries are showing signs of stabalisation having fallen in recent months,’ he said.
‘The continuing strength of the labour market is supporting house prices. In the three months to March the number of full time employees increased by 202,000, the biggest rise in three years. We are also seeing pay growth edging up and consumer price inflation falling, and as a result the squeeze on real earnings has started to ease. With interest rates still very low we see mortgage affordability at very manageable levels providing a further underpinning to prices,’ he added.
According to Russell Quirk, chief executive officer of Emoov, sellers who previously sat on the fence are now starting to take action and adjust their expectations in line with current market conditions in order to secure a sale.
‘As more continue to do so, we should see further stability return and the erratic price trends of previous months begin to evaporate. That said, there is still a disparity at the top end of the market between asking and sold prices and until this gap narrows, an air of lethargy will remain as this tier of property transactions remains stagnant,’ he said.
Kevin Roberts, director of the Legal & General Mortgage Club, believes that the market is now more sustainable and that is good news for many buyers trying to get onto the property ladder. ‘Younger buyers are also benefitting from growing support for schemes like shared ownership, which are putting them in a better position than a few years ago,’ he said.
‘However, this isn’t to say the housing crisis is over. One in every four housing transactions in this country are still supported by the Bank of Mum and Dad. We firmly believe the answer for the challenges facing the housing sector is to build more homes. We are still not seeing enough new housing coming onto the market and a boost to housing supply will certainly provide younger buyers with a much better opportunity to take their first step as a home owner,’ he explained.
According to Lee James Pendleton, founder director of independent estate agents James Pendleton, in London sellers are prepared to adjust their expectations and price their homes at more realistic levels since the end of last year.
‘We’re seeing a bounce in new enquiries as buyers respond with greater willingness to enter the market. The number of homes sold did grow at the last count but being monthly figures starting from such a low base, it’s virtually meaningless. This could be improving if buyer levels across the country follow London’s lead and begin to recover,’ he pointed out.
The fact that sellers are adjusting their expectations is a good sign, according to Jonathan Hopper, managing director of Garrington Property Finders. ‘While the numbers of both buyers and sellers remain modest by historic standards, the market is at least flowing freely and functioning much as it should. Last month’s uptick in buyer registrations in particular was a welcome sign of buyer appetite and stability,’ he said.
‘Crucially, most sellers have jettisoned the unrealistic price expectations fostered by the market’s seemingly endless rise, and the homes being listed for sale are now much more sensibly priced. The softening in prices seen at the start of 2018 could be just what the market needs. As more homes become more affordable for more people, the improving number of transactions is eclipsing the insipid rates of price growth as the key number to watch,’ he added.
However, Jonathan Samuels, chief executive officer of property lender Octane Capital, warned that while the jobs market is strong and mortgages cheap, what confidence consumers do have is being mitigated by the uncertainty of Brexit.
‘The sheer lack of stock will prevent prices from going into freefall but there is a lot of caution in the market at present and it could be premature to write off inflation. Properties will sell if they’re priced correctly but will languish on the market indefinitely if not. Any prospective buyers out there are not prepared to be overexposed,’ he said.
