The latest housing market surveys from the RICS, Nationwide and Halifax make for grim reading.
Both the Halifax and Nationwide price indices show that, after several years of growth, UK house prices are finally starting to slip. Nationwide’s index found that prices fell for the second month in a row in April and the equivalent index from Halifax registered its first quarterly decline since 2012 for the three months to April, with prices dipping by 0.2%.
Meanwhile, the RICS UK Residential Market Survey, which tracks sentiment among surveyors rather than pricing, states that momentum “continues to ebb” in the market.
Simon Rubinsohn, the RICS’ chief economist, says the survey suggests that a “fairly flat summer for both activity and prices” lies ahead, and points to the continuing impact of stamp duty changes as one of the factors hurting the market.
“Lack of stock on the market remains a key challenge for the sector, with recent and forthcoming tax changes having a material impact on transaction levels, particularly at higher price points,” he says.
The other issue commentators flag is that house prices have become increasingly unaffordable. “Housing demand appears to have been curbed in recent months due to the deterioration in housing affordability caused by a sustained period of rapid house price growth during 2014-16,” says Halifax housing economist Martin Ellis.
Housing demand appears to have been curbed by the deterioration in affordability - Martin Ellis, Halifax
“Signs of a decline in the pace of job creation and the beginnings of a squeeze on households’ finances as a result of increasing inflation may also be constraining the demand for homes.”
Pointing to forecasts for continued economic growth, Capital Economics property economist Hansen Lu says “near-term prospects for the market are weaker than a month ago.
But while expectations of prices and sales three months ahead have slipped, expectations a year ahead still look solid.”
CBRE’s head of London development, Peter Burns, adds that the slowdown hasn’t dented developers’ confidence. Indeed, he says that, having recovered from the uncertainty around the EU referendum last year, they are more positive than they were and that the new-build market has held up better than the secondhand one.
“If you’re going to develop, you’re looking for more risk because you want more return, so by nature these people are very good at these markets, and they’re typically positive,” he says. “They have had a wobble, but the supply and demand dynamics have stilled nerves.”
So long as interest rates remain low and the economy stays in relatively good shape, it is hard to see prices falling much further. However, the days when investors and developers could confidently assume capital growth look to be over.
12 May 2017
4 May 2017
26 April 2017
19 April 2017
7 March 2017
16 February 2017