UK house price growth slows to 1.8%

UK house prices increased by 0.1% during July, with annual growth slowing from 2.2% in June to 1.8%, Nationwide has revealed.

The average price of a home is now £277,542, compared with £277,484 a month earlier.

Robert Gardner, Nationwide’s chief economist, said: “Prices remained broadly flat in month-on-month terms, after taking account of seasonal factors.

“Market activity and house prices have remained soft in recent months, in part reflecting the uncertain economic backdrop.

“Geopolitical tensions remain high, with the conflict between Iran and the US again exerting upward pressure on energy prices and market interest rates in recent weeks.”

Buyer demand restricted

Tom Bill, the head of UK residential research at Knight Frank, pointed to mortgage costs and uncertainty over property taxes as factors restricting demand during the summer.

He said: “A combination of higher mortgage costs and uncertainty around property taxation has kept demand in check this summer.

“The slowdown is presumably why Andy Burnham needed to rule out replacing stamp duty with a land value tax this week although the annual game of ‘guess the tax rise’ is not over for the property market after the Prime Minister repeated his predecessor’s line about ‘difficult decisions’ in the Budget.

“Mortgage rates are almost as high as they have been since the start of the Middle East conflict but while the Bank of England turned more hawkish this week, holding rates still appears the most likely approach during the second half of this year.”

Big regional differences

Propertymark’s chief executive Nathan Emerson said supply constraints, borrowing costs and differences in buyer demand continued to affect the market.

He said: “Steady house prices reflect a housing market that continues to find balance despite ongoing economic and political change.

“A combination of constrained housing supply, changing borrowing costs and varying levels of buyer demand continues to influence market conditions, while the national figures mask significant regional variation across the UK.”

Jeremy Leaf, a north London estate agent and former RICS residential chairman, said buyers retained the upper hand, leaving some sellers under pressure to reduce their asking prices.

He said: “After the pick-up in prices last month, it’s interesting but not surprising to note the trend has not been sustained.

“Buyer power remains so sellers are increasingly obliged to soften prices if they want to maintain transactions.

“This survey has proved to be a particularly accurate long-term identifier of market health as it is linked to customer mortgage offers and recorded on approval.”

Affordability issues

Mortgage approvals rose slightly to 58,200 in June but remained below the average recorded during the previous six months, according to Ian Futcher, a financial planner at Quilter.

He said: “This relatively subdued snapshot of the housing market shows activity is far from booming.

“Affordability continues to be a significant challenge, particularly as mortgage rates have drifted higher in recent weeks amid renewed tensions in the Middle East, which is keeping many prospective buyers sat waiting on the sidelines.”