UK house prices fell by 0.2% in June which meant that annual house price growth moderated to 3.3% from 4.6% in May, according to the latest index report.
This takes the average price of a home to £194,258, according to the monthly index from lender Nationwide. The data also shows that in the second quarter prices increased by 1% and are up 4.1% compared to the same quarter in 2014.
Eleven of the thirteen UK regions covered in the index saw a slowdown in the annual rate of growth in the second quarter of the year and it is the smallest annual rate of increase for two years.
However, most parts of the country continued to see annual house price gains apart from Wales and Scotland which recorded small declines. The North remained static while Northern Ireland and London have the highest annual growth.
Indeed, Northern Ireland overtook London to become the strongest performing region, with average prices up 8% year on year but prices remain around 45% below their 2007 peak. London saw a further softening in annual price growth to 7.3%, compared with 12.7% in the first quarter of the year.
The Outer Metropolitan area followed closely behind, with annual price growth of 6.8%. The North was the weakest performing English region, with prices essentially unchanged compared with the same period a year ago. Wales saw a 0.8% year on year fall in average prices, similar to the previous quarter while Scotland was weakest performing region with a 1% fall in prices.
‘This maintains the gradual downward trend that has been in evidence since the middle of 2014,’ said Robert Gardner, Nationwide’s chief economist, but he added that house price growth continues to outpace earnings.
He also pointed out that the slowdown in house price growth is not confined to, nor does it appear to be driven primarily by, developments in London. In quarter on quarter terms, London has continued to see price growth at or above the rate in the UK overall over the past three quarters, while the annual rate of price growth in the capital remains the second highest in the country.
He believes that given the gap between population growth and rates of house building, housing stock is likely to be used increasingly intensively until building activity catches up. ‘There are signs that this has been occurring, with the number of vacant listings trending down since 2008, though council tax changes in 2013 impacted reporting and probably overstate the decline in the last two years,’ Gardner explained.
He added that the strong relationship between supply constraints and vacancy rates is clearly visible at the regional level. ‘As you might expect, regions where affordability is more stretched see far fewer vacancies. For example, in London, the UK region where affordability is most stretched, only 1.7% of the housing stock was vacant in 2014, around half the 3.5% rate prevailing in the North of England,’ said Gardner.
‘Given the apparent supply pressures, it is interesting that instances of under occupancy are relatively high. For example, in 2014 almost half of owner occupiers in England lived in a listing with two or more spare bedrooms,’ he pointed out.
‘While this may represent peoples’ preferences, it may indicate that the housing stock is not be being used as efficiently as it might be, perhaps because of a mismatch between the types of listing people want and what is available. For example, it may be that older people are unable to find suitable listings to downsize, frustrating the ability of families to move into larger homes,’ he added.
Alex Gosling, chief executive officer of online estate agents HouseSimple, believes there’s no immediate cause for concern that the housing market is starting to stutter. ‘Typically, the summer months are often slower months for listing purchase and April and May did see an unusually high level of buyer activity,’ he said.
‘What we’re seeing overall is a return to normality although the lack of listings coming onto the market remains an issue, and come September when buying activity typically starts to pick up again, the picture could be an entirely different one,’ he added.
It is a conundrum at present, according to Jonathan Samuels, chief executive officer of Dragonfly Property Finance, who pointed out that the June dip and ongoing slowdown in the rate of annual growth have come despite the fact that demand is picking up and supply is still constrained.
‘Wages may be improving but it’s hard to see them ever getting consistently close to house prices. London prices may have softened quite considerably but they are still comfortably above the UK regional average,’ he said.
‘The fact that Northern Ireland outperformed all other regions in the second quarter highlights the way in which different regions can wax and wane. It’s hard to predict where the listing market is headed. With a low cost of living, very competitive mortgage rates, renewed political certainty and a strong jobs market, there are many positives,’ he explained.
But he believes that should events in Greece spiral out of control, the UK listing market will not be immune.
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Source: Property News Spain