The subject of house prices and getting on the ‘property
ladder’ is never far from the conversation in London. The news that prices fell
for the first time in six months in February, might offer a glimmer of hope for
first time buyers and potential buy-to-let investors looking for a better
return on their money than the measly rates the banks are offering.
The Nationwide index revealed a 0.3% month-on-month
fall taking the average UK house price to £210,402, down from £211,756 in
January. This marks the first time since August 2017 that house
prices have fallen month on month.
The Telegraph reports the unexpected dip came
after house prices grew faster than expected in January, due to a lack of supply in the property market which
kept competition between buyers high.
Annual house price growth has fallen to 2.2%, Nationwide
said. The building society's chief economist said that while month-to-month
changes can be volatile, the slowdown is "consistent with signs of
softening in the household sector in recent months".
Mr Gardner said Brexit and the economy will be key to
the housing market's performance in the year ahead – doesn’t take an economist
to work that one out! "We continue to expect the UK economy to grow at
modest pace, with annual growth of 1% to 1.5% in 2018 and 2019.
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," he said.
In layman’s language, the economy and market will be slow,
although “experts” and economists have been predicting economic doom and gloom
since the EU referendum.
Bear in mind that most of the commentators are lenders (like
the Nationwide) and estate agents who have a vested interest in maintaining a
healthy property market and obviously don’t want to scare the horses.
Estate agent and former RICS Chairman Jeremy Leaf
said that, as one of the most closely-watched indicators of property
market strength due to its longevity and accuracy, Nationwide’s figures
may "cause concern" – an estate agent’s term for “worried”.
He added that at this time of the year there should
have been an increase, not a fall, in house price growth.
Sam Mitchell, CEO of online estate agents HouseSimple.com
added that while the housing market isn't about to suffer a "full
blown crash", we have some "tough months ahead and a lot of
hard negotiating between buyers and sellers if the market is to get
back on track".
Nationwide’s index covers the whole country, which is
showing a modest slow down. However, new figures from Acadata this week report much steeper price falls in the capital, where the market is a world apart from some parts of the country where prices have been stagnant since 2008.
The data firm said London
prices dropped 4.3% in the year to January, the biggest fall since August
2009.
London prices have been slowing for quite a while, partly
brought on by a sharp increase in stamp duty on more expensive properties and
less foreign buyers, but also because the affordability gap for young
first-time buyers had widened beyond ordinary people’s reach.
The price-to-earnings ratio is now around 10 times average
salaries, making London one of the most expensive and difficult places for
people to get on the property ladder.
The rental market remains strong, but thousands of landlords
have been deterred by recent tax changes which will dramatically reduce their
net earnings from but-to-let properties. Tough new
rules on HMO lettings coming in this autumn will be another blow to
landlords.
What does this all mean for buyers and investors and where
are property prices going? The answer is, nobody really knows for sure. The
more experts you listen to, the more confused you will become!
There is still a massive shortage of homes in the UK and the Prime
Minster Theresa May announced measures to force builders to build more homes
faster and not sit on land. But with interest rates on the rise and mortgage
lending rules tightening, the market is hardly set to boom for the foreseeable
future.
For investors, this could be a time to look for deals.
For first-time buyers, this is good news and a more room for negotiation.
Check out my Podcast version, "UK House Prices Fall, What
Does This Mean For You?" on Anchor! https://anchor.fm/charles-kelly/episodes/UK-House-Prices-Fall--What-Does-This-Mean-For-You-e15m1o
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