In January 2018, the annual rate of house price growth surprisingly picked up to 3.2 per cent, after taking account of seasonal factors. At the end of 2017, the rate was 2.6 per cent, so house prices increased by 0.6 per cent in January for a second consecutive month.
Robert Gardner, Nationwide's chief economist, says: ‘The acceleration in annual house price growth is a little surprising, given signs of softening in the household sector in recent months. Retail sales were relatively soft over the Christmas period, as were key measures of consumer confidence, as the squeeze on household incomes continued to take its toll.’
Similarly, he points out that mortgage approvals declined to their weakest level for three years in December, at just 61,000. Activity has been subdued on both the demand and supply side. Gardner says: ‘The flow of properties coming onto estate agents’ books has been more of trickle than a torrent for some time now, and the lack of supply is likely to be the key factor providing support to house prices.’
The Nationwide report further reveals that the fall in home ownership rate amongst those aged 35-44 has been particularly pronounced in recent years. Consequently, the private rental sector has increased by some 75 per cent over the past decade. Overall, 20 per cent of households in England are now living in privately rented accommodation, up from 13 per cent in 2007.
That trend appears to be supporting the buy to let market, despite recent tax changes that penalise landlords. Graham Davidson, managing director of Sequre Property Investment, comments: ‘The monthly increase in house prices of 0.6 per cent for the second month running confirms that investing in property is still the best way to maximise your capital. A typical £100,000 apartment has risen in value by £600 per month for the last 2 months and by £3,200 over the last 12 months.’ He adds that locations with ‘low prices, high rental yields and constant tenant demand, such as Manchester and Liverpool, have been performing at above the national average and can return even greater returns.’
Looking back at the whole of 2017, house prices in London fell by 0.5 per cent for the first time since 2004. The West Midlands topped the house price inflation table for the first time ever, with average prices up 5.2 per cent year-on-year, while East Anglia saw the biggest slowdown in annual house price growth, from 10.1 per cent in 2016 to 2.3 per cent in 2017.
For the first year since 2008, the annual rate of change in Northern England (West Midlands, East Midlands, Yorkshire & Humberside, North West and North) was above that in Southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia). Northern England saw a 3.6 per cent year-on-year increase, while in the South prices were up only 1.6 per cent.
Alex Gosling, founder of online estate agent HouseSimple.com, says: ‘Fortunately, there's no longer reliance on the London market to prop up the rest of the country. Growing regional business hubs have seen other major UK cities prosper, while London has suffered as property prices have become unaffordable for the majority.’
However, he is cautious as to whether this state of affairs will continue into the coming year. ‘Looking ahead to 2018, we are entering the unknown. Historically, you would expect activity in the housing market to pick up in the first quarter of the year. But with Brexit looming in 2019, it's difficult to gauge how buyers and sellers will react.’
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