House price growth in the UK increased by 0.1% in February and by 1.7% to an average of £219,949, according to the latest index data to be published.
Year on year they are 5.1% higher but this annual rate of growth has slowed from 5.7% in the previous month and is now the lowest since July 2013 and almost halved in the last 11 months, the figures from lender the Halifax shows.
Prices set to keep moving upward as long as the current demand and lack of supply continues, said Martin Ellis, Halifax housing economist. He pointed out that housing demand is being supported by an economy that continues to perform well with employment still expanding.
‘Meanwhile, the supply of both new homes and existing properties available for sale remains low. This combination is pushing up prices,’ he explained, adding that it means that annual price growth could trend lower during 2017.
Alex Gosling, chief executive officer of online estate agents HouseSimple, pointed out that although annual house price growth is showing signs of slowing, there was a rush to buy a year ago ahead of stamp duty changes and 2016 was not a ‘normal’ year for the housing market.
He explained that demand hasn’t fallen away despite uncertainty around Brexit but buyers are taking their time looking before committing to a purchase. ‘The continued supply shortage is still playing a significant role in price stability. The general consensus is that price growth will be low digits in 2017, but the critical Spring market often sets the tone for the rest of the year,’ he said.
‘Early indicators suggest that we could see a healthy Spring as buyers are starting to make offers rather than simply window shopping, and stock levels are creeping up. Also, the Chancellor may want to play a strong hand tomorrow, and if he announces further changes to stamp duty, this could breathe new life into the market,’ he added.
Buyers are committed, but only at the right price, according to Jonathan Hopper, managing director of Garrington Property Finders. ‘The ongoing chronic lack of supply is a significant factor currently underpinning prices. Despite renewed focus on house building by the Government, there doesn’t appear to be a quick fix solution that will change the demand/supply imbalance any time soon, although tomorrow’s budget announcements may help make a step towards this,’ he explained.
‘Despite total UK home sales continuing to push up, we anticipate more sedate price growth in 2017, as rising house price to earnings ratios start to bite in parts of the country and restrict overall affordability. On the ground, there is a pervasive sense of caution. Astute vendors are increasingly prepared to reduce their asking price in exchange for the guarantee of a sale,’ he added.
Rob Weaver, director of Investments at property crowdfunding platform Property Partner, believes that a buoyant jobs market, record low interest rates and the imbalance between high demand for homes and a severe shortage in supply will continue to put upward pressure on prices.
‘If the UK is to fix its broken housing market, it needs radical solutions. There was a lukewarm reception for the recent housing white paper so all ears will now be on tomorrow’s Spring Budget in eager anticipation of any incentives to get Britain building affordable homes,’ he said.