Annual house price growth slows to 5.1%

Ryan Bembridge

September 12, 2017

UK house price growth slowed to 5.1% in July 2017, the Office for National Statistics’ House Price Index has found.

Price growth fell from 5.4% in June despite monthly prices rising by 1.1% to £226,185.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said the figures suggest a fairly stable market.

Base rate held at 0.5%

He added: “This comes at a time when we might have expected more nervousness among buyers and sellers.

“However, it is the shortage of supply, historically low mortgage rates and relatively low unemployment which are underpinning prices, rather than strong buyer demand.

“The market remains relatively subdued due to a shortage of homes for sale, as well as stretched house prices to earnings ratios and lending restrictions.

“Average house prices are still rising more quickly than wages, especially in London, so affordability is reaching breaking point in some places.”

But John Goodall, chief executive of Landbay, does think buyer demand is behind the growth.

He said: “UK house prices appear to be bouncing back to growth as we move into the latter half of 2017.

“Whilst historically low mortgage rates and relatively low unemployment levels have a part to play, this is underpinned by strong overall buyer demand which continues to outpace the number of homes coming to market.

“The UK’s housing shortfall needs plugging, but the initiatives designed to address the problem are blinkered at best.

“Yes tax reform and government schemes to help first-time buyers will improve access to housing in the short-term, but without a radical house building plan, prices will continue to rise over the coming decades.

“Aspiring homeowners are looking to the private rented sector to support them on their path to ownership, so more action on build-to-rent properties would be a welcome development.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, reckoned the focus from lenders is primarily on remortgage lending.

He said: “Lenders remain keen to lend but with the purchase market still relatively quiet, they are turning their attention to remortgaging with some excellent rates.

“Santander is the latest lender to cut pricing on its 2 and 5-year fixed-rate remortgage deals, while other lenders have also been tweaking pricing – HSBC scrapping standard valuation fees and First Direct halving fees and increasing rates – as they jockey for position in the market.

“This is encouraging as it means other lenders must be forced to offer borrowers incentives so as not to be at a competitive disadvantage.”

Jeff Knight, director of marketing at Foundation Home Loans, said: “Potential buyers are facing climbing prices against continued limited supply, further encumbered by lagging wage growth, so it’s safe to say it’s been a struggle to pin-point any significant progress in the market to date.

“The underlying rate of purchasing continues to tick along, with buyers seizing opportunities to maximise record low mortgage rates.

“In the meantime, the rental sector offers a helping hand to tenants looking for temporary homes as they save for homeownership, and what we need now is for construction levels to be equally improved in this space so future availability will not fail to meet the cut.”

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