Property prices edge up in UK in February, but down on a quarterly basis

Property prices in the UK increased by 0.4% in February but annual growth fell to 1.8% from 2.2% in January, the latest house price index shows.

Quarter on quarter prices were down 0.7%, the first quarterly fall since May 2017, taking the overall average to £224,353, according to the data from lender the Halifax.

‘House prices continue to remain broadly flat, as they have since the end of last year. The annual rate of growth has slowed from 2.2% in January to 1.8% in February, the lowest rate of growth since March 2013,’ said Russell Galley, Managing Director, Halifax.

‘The labour market continues to perform strongly with the number of people in employment rising by 88,000 in the three months to December. Notably, this is almost entirely accounted for by full-time jobs. The strength of the jobs market may finally be benefitting wage growth, with the annual growth rate accelerating from 2.3% in November to 2.8% in December,’ he pointed out.

‘However, earnings are rising at a slower rate than consumer prices. Despite the November rise in the Bank of England Base Rate, mortgage rates continue to stay low by historical standards. While we expect price growth to remain low, the low mortgage rate environment, combined with an ongoing shortage of properties for sale, should continue to support house prices over the coming months,’ he added.

Steady growth is a positive sign for the housing market, according to Danny Belton, head of lender relationships at the Legal & General Mortgage Club. ‘Steadier annual house price growth is welcome news to those looking to get onto the property ladder. Couple this with the near record low mortgage rates the market is currently experiencing, first time buyers are in a good position to become home owners,’ he said.

It comes at a time when there are signs of the market picking up approaching spring. Hybrid estate agent Emoov has seen a notable rise in sellers listing their homes and growing interest from buyers.

‘As this increase in stock starts to filter through to actual sales, we will no doubt start to see a stronger, more sustained rate of upward growth. Prices will remain buoyant in the long term due to the strain on the nation’s property stock levels, coupled with persistent demand from home buyers as a result of the lower barrier to obtaining a mortgage,’ said Emoov chief executive officer Russell Quirk.

However, Jonathan Samuels, chief executive officer of property lender Octane Capital, believes that the quarterly decline in prices paints a far more accurate picture of the market than February’s rise.

‘It’s very clear that the financial squeeze on households is impacting demand and, as a result, applying downward pressure on property prices. It’s hard to see the market picking up until there is clarity on the outcome of Brexit and inflation relaxes its grip on household finances,’ he said.

Next month will be a test for the market, according to Jonathan Hopper, managing director of Garrington Property Finders. ‘Bank of England data shows mortgage approvals are strong, suggesting there are plenty of people with the financial firepower to buy. And Easter traditionally marks the start of the Spring rush,’ he said.

‘But if those mortgage approvals fail to convert into sales, and if the Spring boost fails to materialise, then serious questions will have to be asked about the market’s resilience to Brexit uncertainty,’ he pointed out.

He also pointed out that last year the calling of the snap general election meant the Spring boost didn’t happen. ‘To lose one Spring boost may be regarded as a misfortune, to lose two would look like carelessness. With the Bank of England rowing back on its hawkish tone, the prospect of an interest rate rise is receding further into the distance, meaning there’s no shortage of cheap mortgages available,’ he explained.

‘While property supply and demand are modest, the market is still fundamentally sound but the next month will prove an acid test,’ he added.

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