House prices in the UK were unchanged in March and up only 0.1% in the first quarter of the year although they are 3.8% higher than a year ago, the latest index shows.
It means, however, that the annual rate of house price growth has more than halved over the last 12 months, according to the date from lender the Halifax.
It is the second month in a row where the Halifax index has shown that prices have not moved, with the average price of a home remaining at £219,755.
It is also the second index from a major lender in a row that has showed that house price growth has slowed at a time when it would normally be expected to rise going into the busy Spring market.
Just a few days ago the index from the Nationwide shows that house prices fell by 0.3% in March and annual growth was down to 3.5%. While month on month figures do not necessarily give an accurate picture the annual figure is perhaps more telling.
Martin Ellis, Halifax housing economist, pointed out that the quarterly rise of 0.1% is the lowest quarterly rate of change since October 2016 and the annual rate of growth is the lowest rate since May 2013.
‘The annual rate of house price growth has more than halved over the past 12 months. A lengthy period of rapid house price growth has made it increasingly difficult for many to purchase a home as income growth has failed to keep up, which appears to have curbed housing demand,’ he said.
‘Nonetheless, the supply of both new homes and existing properties available for sale remains low. This, together with historically very low mortgage rates, is likely to support house price levels over the coming months,’ he pointed out.
According to Russell Quirk, chief executive of eMoov, some natural adjustment in price levels is no surprise given the rapid level of growth seen in 2016 which was largely driven by a lack of housing stock to meet buyer demand.
‘The triggering of Article 50 may lead to some further uncertainty but this should soon subside and it is likely that the initial upward trend in property price growth seen at the start of the year will continue in the coming months,’ he said.
Not everyone believes that the slowing of price growth is a bad thing. ‘The rate of annual growth is definitely slowing which we have said for a long time is a good thing. Albeit this month it is little lower than we might have expected, this is not definitely not setting off alarm bells,’ said Rob Weaver, director of investments at property investment marketplace Property Partner.
He does not think it should be attributed just to Article 50. ‘Brexit it potentially one of many factors contributing to a slow down along with tighter lending criteria and stamp duty but it is a slowdown in the rate of growth not a fall in house prices. The fundamentals that underpin the market are still there and are very solid, which continues to make residential a compelling investment,’ he pointed out.
‘Indices are only a guide to directions in the market and tend to be more volatile in the short term so we should not read too much into this. Associating this with Article 50 may be a little naïve, you can almost put a ruler to the graph of quarterly annual change for the last 12 months,’ he explained.
‘The low levels of turnover in the market continues to be a concern and a sign of a broken market. A fully-functioning residential property market is good for the economy and we would like to see greater support for the first time buyer and improved lending,’ he added.
Nicholas Finn, executive director of Garrington Property Finders, pointed out that there are considerable variations within the market with some areas seeing double digit reductions, while others are plagued by gazumping.
‘Against the uncertain economic backdrop, there is cause for some optimism as buyer intent remains strong in many parts of the UK. Yet despite the continued availability of some exceptional mortgage deals, most buyers are acutely price sensitive. No one wants to buy a home only to realise they could have got it cheaper if they had waited. As a result buyers, not sellers, are setting the tone, scrutinising prices harder than ever and refusing to overpay,’ he said.
‘Despite rapidly rising consumer inflation the Bank of England is likely to hold back any increase in interest rates for as long as possible, leaving the way clear for the property market to continue its sluggish progress. We expect average prices to continue inching upwards, albeit at a subdued pace as house price to earnings ratios begin to bite in many parts of the country,’ he concluded.
Sundeep Lakhtaria, investment director at residential development finance provider, explained that there are still pressures on the housing market with the latest construction figures showing weaker house building activity.
Year on year comparisons for house price growth will be difficult over the next few months with the ongoing Brexit negotiations and the recent stamp duty changes. So we will be looking closely at upcoming releases for further clues on the housing market’s direction of travel,’ he said.
