Average annual house price growth is still in positive territory – just – at 2.2 per cent although the Nationwide suggests that the reason for the reversal of fortunes in house prices on a monthly basis is due to weakening consumer confidence due to a squeeze on household incomes, and comes off the back of warnings of further interest rate rises in 2018 in order for the Bank of England to keep track of inflation.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “The slowdown is consistent with signs of softening in the household sector in recent months. Retail sales were relatively soft over the Christmas period and at the start of the new year, as were key measures of consumer confidence, as the squeeze on household incomes continued to take its toll.”
Robert continued: “How the housing market performs in the year ahead will be determined in large part by developments in the wider economy and the path of interest rates. Brexit developments will remain a key factor, though these remain hard to foresee.
“We continue to expect the UK economy to grow at modest pace, with annual growth of one per cent to 1.5 per cent in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.
“Nevertheless, housing market activity is anticipated to slow only modestly, since unemployment and mortgage interest rates are expected to remain low by historic standards. Similarly, the lack of properties on the market is likely to provide ongoing support for house prices. Overall, we expect house prices to be broadly flat, with a marginal gain of around one per cent over the course of 2018.”
But what does all this mean if you’re buying and selling currently?
The reality is that whilst the Nationwide figures provide an overall average, currently house prices in the UK are diverging with some areas, such as the East Midlands, North West, Scotland and South West, still seeing significant increases in prices due to high demand.
As the Nationwide report indicates, some areas are still seeing a significant lack of available properties for sale, which in practical terms, provides the support for prices to maintain their current trajectory.
However, in areas where we’ve seen an influx of properties coming on the market in recent months, such as in the Capital and its commuter belt, clearly this creates downward pressure on values.
As Brian Murphy, Head of Lending for Mortgage Advice Bureau explained: “The fact that prices dropped in February from January might suggest that those who were buying properties last month were in negotiation mode and chipping the purchase price.
“At this stage, it’s too early to say that any suggestion of interest rate increases in 2018 made any difference to consumer confidence in relation to house prices in February, and more likely it’s practical factors that caused prices to cool.
“For example, as the Nationwide report suggests, mortgage approvals have hit a three year low, which suggests less competition for properties in some areas, which would naturally lead to it becoming more of a ‘buyers’ market’.”
That all said, month on month comparisons in terms of house prices can be volatile, and this wouldn’t be the first time that we’ve seen a month on month drop, potentially followed by a recovery, a picture we saw last March and April before house price growth bounced back over the Summer.
Which means that, similar to the current weather forecast, it could be all blizzards and freeze in terms of February, but may become balmier and brighter once we enter into the warmer months and buyer and seller activity picks up across the board.
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