Annual House Price Growth at 5-Year Low


November 2018

Annual House Price Growth at 5-Year Low

The annual growth rate of Britain’s house prices is sitting at its slowest pace for over half a decade, Nationwide has announced.

In October, the average property rose in value by 1.6%, which is the lowest annual growth rate since May 2013, having dropped by nearly half a percent from September’s 2% growth rate.

The average price of a UK home remained the same between September and October this year, sitting at £214,534.

The findings of the UK’s largest building society’s HPI show that demand may have been slackened by pressure on household budgets and general economic uncertainty. Nationwide noted that this slow price growth rate comes despite mortgage costs sitting at historic lows and 40-year lows in unemployment.

Robert Gardner, Nationwide's Chief Economist, said, commenting on the data:

“Looking further ahead, much will depend on how broader economic conditions evolve. If the uncertainty lifts in the months ahead, there is scope for activity to pick-up throughout next year. The squeeze on household incomes is already moderating and policymakers have signalled that interest rates are only expected to raise at a modest pace and to a limited extent in the years ahead.”

The lender still expects a 1% rise in house prices this year.

A fall in interest from international buyers, which particularly affects London and South-East house prices, may account for the dropping house prices in those regions. Stalling Brexit negotiations are putting off the international market, with the outcome remaining uncertain.

Samuel Tombs, chief UK economist for Pantheon Macroeconomics, said: "Although mortgage rates are rising only gradually and unemployment is very low, consumers' confidence remains fragile and uncertainty about Brexit increasingly is dampening demand.

"The Budget, meanwhile, contained nothing to directly support demand for existing homes. We continue to expect house prices to effectively flatline over the next six months."

Nationwide said that the number of cash buys has remained ‘buoyant’ during the recovery period following the financial crisis of 2007-2008. A greater number of people bought property in cash right after the crash, as credit conditions and unemployment meant that fewer people could get a mortgage. Nowadays a larger proportion of people own their homes outright, they tend to pay in cash when they move.

Despite this, property sales in the 12 months previous to September were 30% lower than the equivalent period in 2007.

The government’s help-to-buy scheme has helped support the recovery in first-time buyer purchases, which are now at the same level as before the financial crash.

However, Brian Murphy, the Mortgage Advice Bureau’s head of lending, said: “Whilst the chancellor’s ‘feelgood’ budget on Monday delivered little for the majority of home movers, it seems to have been well received by consumers overall, therefore as we enter the final sprint of the autumn market before thoughts turn to the Christmas break, it’s quite possible that the market will continue to tick over at reasonable levels, although without the fireworks that some had hoped for by this stage in the year.”