House price growth slows to 2.1% in August: Nationwide

The annual pace of house price growth fell to 2.1% in August, from 2.9% in July, according to the latest Nationwide house price index.

Related topics:  Finance News
Rozi Jones
29th August 2017
housing market house down decline drop decrease
"In some respects the slowdown in the housing market is surprising, given the ongoing strength of the labour market."

Nationwide says the slowdown in house price growth to the 2-3% range in recent months from the 4-5% average in 2016 is "consistent with signs of cooling in the housing market and the wider economy".

Robert Gardner, Nationwide's Chief Economist, said: “The economy grew by c.0.3% per quarter in the first half of 2017, around half the pace recorded in 2016. The number of mortgages approved for house purchase moderated to a nine-month low of c.65,000 in June and surveyors have reported softening in the number of new buyer enquiries.

“Nevertheless, 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 forty years. In addition, mortgage rates have remained close to all-time lows.

“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 notparticularly stretched at a UK level, pressures are evident in some regions – especially London and the South of England.

“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."

Brian Murphy, Head of Lending at Mortgage Advice Bureau, commented: "There are a number of factors which could be responsible for current market conditions; ongoing consumer demand and continuing lack of supply are perhaps maintaining prices at 10% above the 2007 peak, whilst lack of wage growth is having an effect on mortgage affordability, meaning that those coming to the market currently do have an upper limit in terms of borrowing, which of course suggests that vendors have to be realistic about pricing in order to sell.

"It’s also possible that the continued lack of buy-to-let investors, due to income tax and SDLT changes, is having an effect on values, albeit that the impact of this group not being as active as they have been in recent years has perhaps taken some time to ripple through and have a tangible impact on values.

Bearing all of this in mind, a slight cooling in pricing is perhaps no bad thing; we need a stable, sustainable market to enable first time buyers to be able to get on the ladder as they are the ‘lifeblood’ of the UK property ecosystem and to ensure that the wider economy continues to function as per normal. Therefore if pricing is now beginning to become more aligned with affordability, together with record low interest rates and a raft of competitively priced lower deposit mortgages available, hopefully these factors will enable those who are currently hoping to buy their first home to transact, as well as providing the opportunity for second steppers to move which would have a positive impact on the market.

"Given that house prices are now so far above the peak of a decade ago, a slight cooling in prices is perhaps no bad thing if it means that we don’t face another house price bubble and the inevitable house price correction – with its wider economic implications - that would follow.”

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