Month on month we have been reading about house prices continuing to creep upwards across the UK with the only exception being prime London and the latest Nationwide Building Society House Price Index for February is not changing that pattern yet. The Nationwide report that price growth in February was up to 4.5%, a 0.6% month-on-month rise.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “The annual rate of house price growth was little changed in February at 4.5%, only slightly higher than the 4.3% recorded in January. House prices increased by 0.6% over the month, after taking account of seasonal factors.
“Recent data suggests that the UK economy has continued to perform relatively strongly. The economy accelerated slightly in Q4, expanding by a healthy 0.7% quarter-on-quarter, and the unemployment rate remained stable at an 11-year low of 4.8%.
“The outlook is uncertain, but we, along with most other forecasters, expect the UK economy to slow through 2017 as heightened uncertainty weighs on business investment and hiring. Consumer spending, a key engine of growth in recent quarters, is also likely to be impacted by rising inflation in the months ahead as a result of the weaker pound.
“Nevertheless, in our view a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices.
It is interesting to note that the Rightmove House Price Index for February reported that their visitor traffic during January was up 3% on last year’s buy-to-let boost.
Miles Shipside, Rightmove director and housing market analyst comments: “While the prices of goods in shops are rising at a faster rate, the pace of price rises in property coming to the market is slowing. They’re still 2.3% higher than a year ago, but perhaps we’re approaching the territory where many buyers are unable or unwilling to pay what sellers are asking, given the negative combination of rises in the cost of living, tighter lending criteria, and a dose of Brexit uncertainty. The housing market has had a long sprint since April 2013 when the annual rate was last below this level, so it’s not surprising that upwards price pressure is running on tired legs with average prices today being 23% or nearly £60,000 higher than they were then. This surge in the cost of home-ownership highlights some of the issues referred to in the government’s recent White Paper on fixing the broken housing market.”
The Rightmove report states: The slower pace of price rises means that over-priced properties are at greater risk of standing out as poorer value for longer, diminishing the interest of potential buyers. If prices are rising quickly then they will catch up with an over-priced property sooner, making it less obvious that it is more expensive than local comparable properties. With buyer affordability increasingly stretched, three quarters of agents (75%) surveyed by Rightmove report their local market as price sensitive and that an asking price more than a few percent too high will harm interest levels in the property.
Ahead of a much-anticipated Budget announcement by Chancellor Philip Hammond on Wednesday, we await to see whether stamp duty reforms will become a reality and what new measures may help first-time buyers bridge the growing affordability gap. It is going to be an interesting year for asking prices!