UK house prices hit record but price growth weakens
Photo credit should read: Rebekah Downes/PA Wire
The average price of a UK house hit another record in November but the pace at which values increased slowed for the third consecutive month to their lowest level for a year, according to one of the country’s biggest mortgage lenders.
The Nationwide Building Society said there was a growing disconnect between the slowing housing market and the broader national economic indicators, which remain “upbeat”.
This would continue for a few months, it said, but if the economy, and particularly the labour market, continued to improve then the medium-to-longer-term outlook for the housing market was positive.
Nationwide said the average price, not seasonally adjusted, rose £55 to £189,388 but the average annual change dropped to 8.5 per cent from 9 per cent in October. It was the slowest rate of change since December 2013 and well below the 11.8 per cent peak reached in June.
The monthly change was 0.3 per cent, down from 0.5 per cent the previous month.
The house price index produced by the Land Registry, also on Friday, reported that in October house prices recorded an annual 7.7 per cent increase, with the average price at £177,377, down from a peak of £181,269 in November 2007. The monthly increase was 0.1 per cent since September.
Robert Gardner, Nationwide’s chief economist, said housing market levels had remained relatively weak, with the number of mortgage approvals almost 20 per cent below the level at the start of the year and 27 per cent below the long-term average.
On Tuesday Nationwide reported a £1bn fall in gross new mortgage lending, down to £13.1bn in the six months to September as high street banks returned to the market and stringent affordability regulations took root.
Mr Gardner said the disconnect between house prices and the wider economy was “a bit of a puzzle”. “It could be a hangover from the summer when the [Bank of England’s] Monetary Policy Committee said it was going to take the heat out of the market.”
He said that forward-looking indicators such as new buyer enquiries pointed to “further softness in the near-term”.
“However, if the economy and the labour market remain in good shape and mortgage rates do not rise sharply, activity is likely to pick up in the quarters ahead,” he said.
Another positive sign, Mr Gardner said, was that “affordability does not appear overly stretched, at least at the UK level”.
“First-time buyers [are] continuing to represent an unusually high proportion of mortgage activity and with typical mortgage payments as a share of average income close to the long run average,” he said. “Historically low mortgage rates have helped to mitigate against the fact that house prices have been outstripping income growth.”
The housing market turnover rate was also still low, Nationwide said, with the number of mortgage transactions currently equal to about 4 per cent of the housing stock, two percentage points below the long-term average.
Howard Archer, chief UK and European economist, said the falling mortgage approvals “point to a clear underlying moderation in housing market activity”.
“Even so, buyer interest in houses is unlikely to fall away and it should be at a decent level going forward with significant support set to come from elevated consumer confidence, markedly rising employment and still low mortgage interest rates,” he said.
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