LONDON – UK house price growth turned negative again in August following a jump in the previous two months.
Nationwide’s seasonally adjusted measure of UK house prices fell by 0.1% month-on-month in August, slightly below the 0.0% consensus from economists.
Year-on-year growth dropped to 2.1% from 2.9% in July, also below the 2.5% consensus. The average UK house price is now £210, 495, according to Nationwide’s index.
House prices in Britain have slowed sharply since the middle of the year, a trend which has been driven by uncertainty relating to Brexit, stagnant wage growth, and a slowdown in the pace that mortgage rates are falling.
Robert Gardner, Nationwide’s chief UK economist, said the slowdown was consistent with the cooldown in the wider economy.
“The slowdown in house price growth to the 2 to 3% range in recent months from the 4 to 5% prevailing in 2016 is consistent with signs of cooling in the housing market and the wider economy,” he said in a statement.
“The economy grew by around 0.3% per quarter in the first half of 2017, around half the pace recorded in 2016. The number of mortgages approved for house purchase moderated to a nine-month low of around 65,000 in June and surveyors have reported softening in the number of new buyer enquiries.
“Nevertheless, in some respects the slowdown in the housing market is surprising, given the ongoing strength of the labour market. The economy created a healthy 125,000 jobs in the three months to June and the unemployment rate fell to 4.4% – the lowest rate for over forty years.”
A downward trend
“Shrinking like a tyre with a slow puncture”
Lucy Pendleton, director of estate agents James Pendleton, said in an emailed note: “We’re back into negative territory and the annual growth rate has been broadly shrinking like a tyre with a slow puncture since the middle of last year so no surprises that the trend has continued.
“The annual rate of growth has more than halved in a year, from 5.6% twelve months ago.
“August’s performance has matched that of May which saw the lowest annual growth rate since the Brexit vote but the market is still outpacing the economy in general by some considerable margin. Economic growth was running at only 0.3% in the second quarter so the housing market still has a solid lead.”
“Prices will struggle to rise much”
Most analysts expect the market to continue growing, underpinned by a chronic lack of housing stock. Estate agents Savills predicted 2% growth in 2018, and property firm JLL predicted 1% growth in the same year.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the underlying trend in prices is “only slightly upwards,” with prices having risen by just 1% this year.
“Prices likely will continue to struggle to rise much, given that inflation still has further to rise, consumer confidence has deteriorated sharply since June and lenders intend to reduce the supply of unsecured credit,” he said in an emailed note.
Tombs predicts prices will be up just 1.5% year-on-year by December.