Monday, 5 March 2018

Unexpected fall in house prices suggests 'tough' time ahead

House prices fell for the first time in six months in February, suggesting some "tough months ahead" before the market gets back on track.

Nationwide's index shows that a 0.3pc month-on-month fall took the average UK house price to £210,402, down from £211,756 in January, the first time since August 2017 that house prices have fallen month on month.

The dip came after house prices grew stronger-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 slowed to 2.2pc, 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".

He said: "Retail sales were relatively soft over the Christmas period and at the start of the new year, as were key measures of consumer confidence, as the squeeze on household incomes continued to take its toll."

Mr Gardner said Brexit developments and the state of the wider economy will be key to the housing market's performance in the year ahead. "We continue to expect the UK economy to grow at modest pace, with annual growth of 1pc to 1.5pc 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.

Estate agent and former RICS residential 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".

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 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".

The UK housing market has slowed since the EU referendum in 2016, and many economists have predicted growth to flatline this year.

In December, the Royal Institution of Chartered Surveyors said that it expected house price growth to "grind to a halt in 2018", amid a toxic cocktail of low levels of sales and homes on the market, as well as cautious buyers.

In the capital, average house prices dropped 0.5pc in 2017 compared to the previous year – the first fall in eight years – making the city the worst performing region in the UK for the first time since 2004.

On Wednesday, estate agent chain Foxtons reported a slump in profits, saying it has struggled to cope with London's slowing property market.

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