House price growth in the UK stalled in February after a more buoyant start to the year, according Nationwide’s latest house price index.
House prices in February fell 0.3 per cent, the first month-on-month fall since August last year.
Annual house price growth has slowed to 2.2 per cent, from 3.2 per cent growth in January.
The average price of a home in the UK is now £210,402, down from £211,756 the previous month.
Nationwide chief economist Robert Gardner warned that this slowdown wasn’t a monthly ‘blip’ but reflected wider changes in the housing market.
He says: “Month-to-month changes can be volatile but the slowdown is consistent with sings of softening in the household sector in recent months.”
He pointed to declining retail sales and falling consumer confidence as the squeeze on household incomes takes it toll.
Gardner pointed out that mortgage approvals declined to their weakest level for three years in December, at just 61,000.
“Activity around the end of the year can often be volatile but the weak reading comes off the back of subdued activity in October and November.” Surveyors have also reported that new buyer enquiries remain soft in recent months.
On Wednesday estate agents Foxtons reported a slump in profits, saying activity in London was near historic lows.
Gardner warns that the performance of the housing market over 2018 will depend on developments in the wider economy, and the speed at which interest rates rise. He says: “Brexit developments will remain a key factor, though these remain hard to foresee.
“Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.”
However he predicted that activity would slow “only modestly”, helped by low levels of unemployment and historically low mortgage rates. He adds that the lack of properties on the market is likely to provide ongoing support for house prices.”
House prices will remain broadly flat over the year, he says, with a “marginal gains” of about 1 per cent during 2018.
Garrington Property Finders executive director Nicholas Finn says: “January’s rapid jump in prices turned out to be a blip rather than a turning point – and the market is settling back into its pattern of modest growth.”
He adds:“While limited supply continues to prop up prices, behind the scenes there has been a shift in the power dynamic. The experience of 2017 – especially in London’s prime areas – has forced sellers to radically adjust their price expectations, and the new properties that come onto the market tend to be much more sensibly priced.”
Legal & General Mortgage Club’s director Jeremy Duncombe adds: “Prices continue to rise but at much healthier levels than in previous years. This coupled with competitive mortgage deals and Government schemes should give more and more would-be buyers the opportunity to step onto the property ladder.
“Affordability, is however still a main cause for concern, particularly for buyers in the South and South East.”