AMID reports this week from HMRC of sliding numbers in residential property transactions for the first quarter, today’s news from Nationwide that house prices held solid in April provides some comfort that the UK housing market hasn’t entirely gone into reverse gear.
According to latest data released by mortgage lender the Nationwide this morning, house prices edged up month on month by 0.2 per cent, with the annual rate of growth now standing at 2.6 per cent.
The figures, which are based on property valuations at post Survey mortgage approvals stage, would indicate that the UK average property price rose from £211,625 in March to £213,000 in April.
Looking back to April 2017, the average property price was £207,699.
Robert Gardner, Nationwide’s Chief Economist, commented “These figures are broadly in line with our expectations and close to the average for the last three months of 2017. Surveyors continue to report subdued levels of new buyer enquiries and recent months have also seen a softening in new instructions.”
“Looking ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates.
Subdued economic activity and the ongoing squeeze on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year. We continue to expect house prices to rise by around one per cent over the course of 2018.”
Elsewhere in today’s report, the Nationwide indicates that cash buyers now account for around a third of all residential purchase transactions.
There’s a strong likelihood that this is as a result of house prices increasing so significantly over the last decade, which means those who are now selling are using the capital they’ve accrued in their property to buy their next home outright, rather than requiring a mortgage to do so.
Robert Gardiner explains, “As the UK population ages, so the proportion of people who own their home outright has increased, and when these people transact – for example, moving home or downsizing – they are more likely to do so in cash.
“Indeed, the number of people in England who own their home outright overtook those who own with a mortgage in 2014.”
However, for those who do need to borrow in order to fund the purchase of their home, Mark Carney’s comments last week may provide some short-term reassurance.
Following the surprise drop in inflation and weaker than expected retail sales figures, the Governor of the Bank of England warned consumers and businesses alike to “prepare for a few interest rate rises over the next few years”, although what was previously thought to be a racing certainty that there would be an increase in May would now appear to be less of a done deal, with Carney adding he is “conscious that there are other (Monetary Policy Committee) meetings over the course of this year.”
With estate agents across the country citing this April as one of the toughest marketing environments in recent years due to the inclement weather meaning that buyers mainly stayed at home and sellers held off putting their homes on the market, the fact that house prices rose at all last month would appear to be more of a reflection of the lack of properties for sale keeping pricing afloat than a surging spring market.
As Jeremy Leaf, former RICS residential chairman, observes “The small increase in house price growth is probably more to do with a lack of supply rather than a burst of springtime activity.
Nevertheless, a rise is more welcome than a fall and in line with other recent statistics shows that the market is continuing to follow a slow upward path, albeit without any fireworks.”
Brian Murphy, Head of Lending for Mortgage Advice Bureau is also pragmatic about the figures, suggesting that, “Whilst the growth outlined is, at best, incremental, it does at least point to a market which has remained robust in the first four months of this year, and one that is performing within the parameters expected by analysts who predicted that annual house price growth would be at around this level in 2018.”
A lacklustre market isn’t all bad news though. With affordability levels stretched as they are currently, then any chance at all for first time buyers to take advantage of a slower than normal market whilst interest rates are still low is no bad thing.