Halifax confirms UK housing market is stuttering

According to the latest Halifax House Price Index, house prices have stalled to their lowest annual growth rate in four years with virtually no change in prices in the quarter to the end of May 2017.

Relocate Editorial

7 June 2017

House price growth in the UK has declined to about a third of the rate it was a year ago, according to the latest survey from the Halifax.

A stalled market

The bank's index, which reflects other recent reports of a stalled market, suggested prices increased 3.3 per cent year-on-year in May – the lowest annual growth rate in four years. Halifax added that there had been “virtually no change” in prices in the quarter to the end of last month, leaving the average, nationwide average at £220,706.Martin Ellis, Halifax housing economist, said, “The fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, is likely to support house price levels over the coming months.”

Not a month-to-month decline

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, commented, “Admittedly, average prices still are 0.7 per cent below their December 2016 peak, but Halifax hasn't reported a month-to-month decline in prices since January.“Recent further falls in mortgage rates are helping home buyers to take out slightly larger loans, even though their real wages are falling.“In addition, prices are being underpinned by a sharp reduction in supply. The extremely low rate of job losses means that few home owners are being forced to sell their homes and many are deciding to delay listing their homes until the market strengthens again.“So, while the days of rapid house price growth fuelled by sharp increases in leverage are over, we still see scope for prices to edge up over the rest of 2017.”

Uncertainty is affecting the housing market

Alex Gosling, chief executive of online estate agents HouseSimple.com, said a great deal of uncertainty was currently affecting the housing market.“House prices have fallen over the past quarter during a time when we’ve seen Article 50 invoked and a General Election called,” he added. “The general election was meant to be a foregone conclusion for the Tories but has ended up being a much tighter race than anyone expected.“All this political and economic uncertainty is inevitably hitting buyer and seller confidence. We could well see a late spring bounce after the election result, although that depends on which way it goes, and right now that is anyone’s guess.“We need a majority government, because a hung parliament wouldn't be a great outcome for a property market already showing signs of slowing.“However, let's not raise the white flag just yet. This is not a property market in crisis – it's just that we're so used to seeing prices rise relentlessly every month that everyone is ready to press the panic button the moment prices stall. “It's likely growth will be low single digits this year, but the buyers and sellers are still out there. “Demand hasn't fallen away, although buyers are spending more time looking before committing to a purchase. And the continued supply shortage is still supporting prices.”

A stumble or a stagnation?

Jonathan Hopper, managing director of Garrington Property Finders, added, “The drumbeat of a slowing market is getting steadily louder. But with the monthly price change still in positive territory in May, it’s an open question whether we’re seeing a stumble or a stagnation.“There are two factors behind the slowdown. The cooling effect unleashed by the snap election announcement was instant but is likely to be temporary. But the longer-term issue is more worrying – falling real wages are eroding buyer confidence and squeezing affordability.“For too long the gap between house price growth and wage growth has been a gulf. This was unsustainable and it was inevitable that prices would ease, especially in the areas where they had been rising fastest.“But nothing puts the brakes on the housing market more than the sense that prices may ease in future. Would-be buyers are quick to sit on their hands if they think waiting could save them money.“The lack of supply remains chronic, with the RICS reporting a 14th consecutive fall in the number of properties coming on the market in April. Ordinarily this would prop up prices, and in some areas we are still seeing stiff competition among buyers for good properties.“Election uncertainty is far from the only issue facing the property market, but if Friday morning brings a clear result there’s a good chance the market will ease past its current speed bump. A dose of clarity is what is needed to free up more supply and spur discretionary buyers back into action.”

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Reduction in number of buyers

Lucy Pendleton, director of James Pendleton estate agents, described the latest data as suggesting the UK was confronting “a sideward-moving, not downward-spiralling, market”.She added, “The real issue in the market at present is a reduction in the number of buyers, with more cautious landlords a key factor in this. Stock is less an issue than some are making it out to be. “While first time buyers, spurred on by exceptionally cheap mortgage finance and some helped by the Bank of Mum and Dad, are taking up a good level of the slack, landlords are still weighing up their options. Who can blame them? There has been a lot of change over the past year or two.“In the capital, the search for yield has evolved into a search for capital growth and many landlords have either dug in or are exploring new areas. At the higher end of the market, tiered stamp duty is considerably more of an issue than Brexit.“In London, political uncertainty is playing far less a role in the flat market than everyday households being hit exceptionally hard in their pockets through stamp duty.”For related news and features, visit our Residential Property section.Access hundreds of global services and suppliers in our Online Directory Get access to our free Global Mobility Toolkit

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