House prices in the UK fell by 0.1% in April and were down 0.2% quarter on quarter to an average of £219,649, the latest index shows.
Year on year prices are still up 3.8%, unchanged on the previous month, but low interest rates and an acute shortage of properties to buy should underpin house prices in the coming month, according to the index report from major lender the Halifax.
According to Martin Ellis, Halifax housing economist, prices have stagnated over the past three months with the first quarterly decline since November 2012 and annual growth at its lowest rate since May 2013.
‘Housing demand appears to have been curbed in recent months due to the deterioration in housing affordability caused by a sustained period of rapid house price growth from 2014 to 2016. Signs of a decline in the pace of job creation, and the beginnings of a squeeze on households’ finances as a result of increasing inflation, may also be constraining the demand for homes,’ he said.
Russell Quirk, chief executive officer of eMoov, believes that the market has begun to naturally adjust after a long period of sustained inflation. ‘We’ve seen an abundance of buyer demand and a lack of sufficient stock heat the market and it would seem that it is finally beginning to level out,’ he said.
‘This slowdown may also be due to a number of other influential factors such as the uncertain political landscape and, it will be interesting to see if the market bounces back over the coming months,’ he explained.
‘That said, sellers are still seeing the price of their property increase annually and this slow in price growth will no doubt be welcomed by those on the other side of the fence, who are struggling to get on the ladder,’ he added.
Jonathan Samuels, chief executive officer of specialist property lender, Octane Capital, also believes that rising inflation is without doubt hitting demand for property, as prospective buyers start to feel the pinch.
‘There are other forces at play. The property market is experiencing an affordability hangover from the price growth of recent years, while ongoing Brexit negotiations and cross-Channel spats are also creating uncertainty,’ he pointed out.
‘Combine the rising cost of living with muted wage growth, add in political and economic uncertainty, and a period of prolonged house price stagnation is a real possibility. Yes, the lack of supply will prevent prices from falling sharply, and record low mortgage rates will continue to provide support but for now this remains very much a sideways moving market. With the general election approaching, it’s hard to see any material uplift in activity until the Autumn,’ he added.
A range of factors are contributing to the recent cooling of the market, from squeezed household incomes and rising inflation, to buyers adopting a sit and wait approach until the general election is decided, according to Ishaan Malhi, chief executive officer of online mortgage broker Trussle.
‘Homes continue to be unaffordable for so many young people, particularly in London, which may also be contributing to the price drop off. It’s no surprise that a recent report showed that there’s been a surge in 25 to 34 year olds living with their parents in the last decade,’ he said.
