There has been a lot of focus this month on the latest report from Nationwide, which shows house prices have now fallen for 3 months in a row.
After so many years of house price rises, we have all begun to believe prices only ever travel in one direction – up. Most commentators, however, were already predicting low growth for this year of around 1%-4%. Nationwide’s figures are comfortably within those parameters, with annual growth currently sat at 2.1%. On releasing their latest report, Nationwide also stated,
”The subdued level of building activity and the shortage of properties on the market are likely to provide support for prices. As a result, we continue to believe that a small increase in house prices of around 2% is likely over the course of 2017 as a whole.”
There were several reasons behind those earlier predictions of slow growth and they remain much as they were at the start of the year – there are the conflicting issues of ultra low mortgage rates versus low wage growth, SDLT and stretched affordability.
There are also the issues of shortages of housing stock and record employment levels against the uncertainty caused by #Brexit and the unexpected general election. The resulting balance is positive, but not overwhelmingly so and has resulted, as you would expect, in exactly the conditions we are now experiencing – i.e. growth, but at a much lower level than in previous years.
In contrast, Rightmove’s May 2017 figures are more upbeat, reporting buoyant demand and rising prices for five consecutive months, up 1.2% in May 2017. The difference between the two indices is partly due to the fact that Rightmove’s figures tend to be further ahead of the game as they are based on asking rather than sold prices.
Last month, for example, their annual growth figure was 2.2% – almost identical to Nationwide’s 2.1%. In May 2017, that figure had risen to 3.0% and may be a sign of improving conditions.
One issue everyone had agreed on was that the election was having little effect on prices, but with the shock of a hung parliament, there may be a short period of uncertainty whilst the new informal coalition between the Conservatives and the DUP takes shape. Fortunately the financial markets have been relatively unfazed by developments, as #Brexit meant they had already factored in challenging conditions and many are now seeing this as an opportunity for a softer, more business friendly deal with the EU.