Conveyancers comment on low growth in UK house prices
House prices increased by 3% in the year to May 2018 (down from 3.5% in April 2018) according to the Office of National Statistics.
This is its lowest annual rate since August 2013 when it was also 3.0%. The annual growth rate has slowed since mid-2016 and has remained under 5%, with the exception of October 2017, throughout 2017 and into 2018.
This drop in UK house price growth is driven mainly by a slowdown in the south and east of England. The lowest annual growth was in London, where prices decreased by 0.4% over the year. This is the fourth consecutive month that London house prices have fallen over the year.
Beth Rudolf, Director of Delivery at the Conveyancing Association, said: “It should come as no surprise to anyone that price growth is low; there is simply nothing to push it up with inflation staying steady, no rise in interest rates and uncertainty over the future thanks to Brexit. Additionally, the under-30s have been put off buying by media reports of £20k deposits and having to be over 35 to afford a property. However, this is simply not the case and first-time buyer properties are out there. For £130k, you can buy a two-bed house in towns like Swindon or Derby with a £6.5k deposit, or a three-bedroom house in Swansea or one-bedroom apartment in Milton Keynes. If we can stimulate activity at the beginning of chains we will see the market begin to move once more.”
Andy Sommerville, Director at Search Acumen, comments: “Today’s figures show that the slowing UK housing market has now effectively hit a brick wall. For some, this is a welcome relief. Particularly in the capital, stalled house prices mean first-time buyers finally have a better chance of catching up. With the exception of the top end London market – which has burst – the rest of the London market has deflated.
“But if we see a stalled housing market as a good news story, we’re very much off course. A healthy economy allows for gradual price growth alongside improved affordability on the part of the borrower. We’re a long way from that today. At every level of the housing ladder, there’s stasis, and that will ultimately hurt our economy.
“Undoubtedly there will be wringing of hands and calls for more houses to be built to kick-start this anaemic market. But it’s not as simple as that. To make the most of the land we have, the industry needs to embrace smart data to make the right decisions. We need to better catalogue what we have and better plan for what we need to be able to meet bold new build targets. But, if we can embrace new technologies at hand today, we could start to see enough houses begin to be built more effectively and efficiently.”
Doug Crawford, CEO of My Home Move, comments: “Today’s figures will be music to the ears of Generation Rent who have been locked out of the UK’s housing market, with repeated promises of help at hand but little movement to turn the tide of falling homeownership. However, areas that have experienced immense price growth over the last decade are finally cooling as London prices fall for the fourth consecutive month in 2018.
“While first time buyers in the capital finally get some welcome news, recent indicators won’t be quite so reassuring for existing homeowners, particularly those across the South and East of England with one eye on their property investments. Many will be watching closely for signs of stability during the second half of 2018 as uncertainty across the political landscape rumbles on.
“Nevertheless, demand remains strong for property across the country and, with prices having cooled in some areas, the underlying appetite for housing should help to keep the market moving. In the meantime, as a nation we must ensure there is sufficient supply of new homes coming onstream to help correct the long-term supply shortage.”
Nick Chadbourne, chief executive of LMS, said: “Sluggish house price growth in May will reduce the incentive for homeowners to move. This slowdown will be a boost to the remortgage market. With property values no longer rising rapidly, many homeowners are sitting tight and remortgaging to extend their own property, rather than moving. Our figures show 26% of borrowers remortgaged this month to fund home improvements. Many borrowers are also taking the opportunity to release more equity from their homes, as the gap between average advances and redemptions is at its highest level in ten months. And the slower house price growth will also be welcome news for those hoping to get on the property ladder. When combined with minimal increases in average rents, we may see an uptick in first-time buyers in the coming months.”