Annual growth of UK house prices remained below one per cent for the sixth consecutive month in May, as political uncertainty continued to weigh on the property market.
Prices fell 0.2 per cent month-on month, while annual house price growth slowed to 0.6 per cent, falling from 0.9 per cent in April and below the consensus of 1.2 per cent, according to Nationwide.
That left the average UK house price in May at £214,946.
Brexit caution weighs on UK housing market
“Nationwide’s data confirm that house prices remain on an essentially flat trend, primarily because Brexit uncertainty has instilled some caution among buyers,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
He added: “The trend likely won’t improve in the next couple of months, given the political deadlock in Westminster.”
The data underlines fears of a persistent slowdown in activity in parts of the UK’s residential market amid uncertainty over Brexit, with industry experts noting in recent months that many buyers and sellers have adopted a “wait and see” approach until the political deadlock comes to an end.
However, following the avoidance of a no-deal Brexit on 29 March, a number of studies have signalled a recent uptick in consumer confidence, with UK Finance finding mortgage approvals at a 26-month high last month.
But Howard Archer, chief economic adviser to the EY Item Club, warned any boost from avoiding Brexit would be “limited”.”With Brexit being delayed until 31 October – and it currently very unclear what will happen then – and the domestic UK political situation volatile, prolonged uncertainty will weigh down on the economy and hamper the housing market,” he said.
And he predicted UK house prices will only rise one per cent over 2019.
First-time buyer numbers start to recover
Nationwide also said today that first-time buyer numbers have continued a steady recovery in recent quarters, apart from in London, where “a period of rapid house price growth…means that monthly mortgage payments would also be unaffordable for a large proportion of the local population”.
The research found that the process of saving up for a deposit was one of the key barriers for many potential buyers.According to today’s study, it takes roughly 15 years for someone earning the typical wage in London to save for a 20 per cent deposit on their first home. Robert Gardner, Nationwide’s chief economist, said: “Survey data suggests that new buyer enquiries and consumer confidence have remained subdued in recent months.
“Nevertheless, indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable.”
He added that those buyers will continue to be put off by the current economic uncertainty, despite high employment and wage growth.
“While healthy labour market conditions and low borrowing costs will provide underlying support, uncertainty is likely to continue to act as a drag on sentiment and activity, with price growth and transaction levels remaining close to current levels over the coming months,” he said.
Volatile UK housing market reflects Brexit divisions
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Once again, we see no real pattern for the housing market emerging – one month prices, transactions or mortgage approvals are up, then down or very little movement, the next.
The good news for us at the sharp end is that there is no major correction being seen or expected for the time being at least, despite some predictions to the contrary.”However, the recent EU parliamentary elections demonstrate the country is still massively divided about Brexit just as the property market is split about how to remove the uncertainty it has created.”
By Sebastian McCarthy
Source: City AM