UK property price growth falls 0.1% in August

August saw a very slight fall in property prices in the UK by 0.1%, as the rate of annual house price growth continued to slow, the latest index indicated.

Data from the Nationwide revealed that annual house price growth slowed from 2.9% in July to 2.1% in August, a marked reduction from the 4% to 5% range during 2016. This is said to be an indicator of a cooling in both the housing market and economy, according to Robert Gardner, Nationwide’s chief economist.

In some respects the slowdown in the housing market is surprising, given the ongoing strength of the labour market. The economy created a healthy 125,000 jobs in the three months to June and the unemployment rate fell to 4.4%, the lowest rate for over 40 years. In addition, mortgage rates have remained close to all-time lows,” he commented.

“It may be that mounting pressure on household finances is exerting a drag. Wages have been failing to keep up with the cost of living in recent months and consumer sentiment has weakened. While measures of housing affordability are not particularly stretched at a UK level, pressures are evident in some regions, especially London and the South of England,” Gardner added.

“Ultimately, housing market developments will depend on wider economic performance. The UK economy slowed noticeably in the first half of the year, and there has been little to suggest a significant rebound in the months ahead. While employment growth has remained robust, household budgets are under pressure. This suggests that housing market activity will remain subdued,” he said.

“Nevertheless, constrained supply is likely to continue to provide support for house prices. The stock of homes on estate agents’ books remains close to 30 year lows and the number of new homes coming onto the market remains subdued. As a result, we continue to expect prices to rise by around 2% over 2017 as a whole.

The report also indicated that stamp duty revenues totalled £12.8 billion in the 12 months to the second quarter of 2017, comfortably beating the £10.6 billion peak recorded in late 2007.

Andrew Turner, chief executive at Commercial Trust, commented:

The slowdown in property growth cannot come as much of a surprise given the rise in inflation and how the cost of living is outpacing wage growth presently. 

“Many people want to take that first step on the property ladder, but are currently unable to on account of affordability. Factor in the uncertainty surrounding Brexit and people are understandably less inclined to invest at present and that in turn has led to a slowing down in property price growth.

“One of the main profit considerations now is the additional stamp duty surcharge on second homes, which is acting as a deterrent to some buy-to-let landlords.

“However, demand still remains high and at the moment the number of new homes being built each year is insufficient to meet needs, so the fall in growth is likely to be limited in the medium to longer-term.

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This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.