Economic Update: UK Housing Market
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
UK house prices rose 2.7% last year according to the largest mortgage lender, Halifax. However, the rate of growth is cooling. Today’s figure is much lower than the growth of 6.5% in 2016 and the weakest increase since 2012.
Data on housing is far from perfect and at times different providers have given different versions of what is happening to house prices. However, you can see from the chart below that both Halifax and Nationwide paint the same picture for December, with little separating their estimates.
The reasons behind the slowing growth rate range from inflation continuing to outpace wage growth, to a very marginal increase (0.1% to 0.2%) in fixed mortgage rates since September.
UK House Prices – Year on year % change
Source: Nationwide (annual comparison by month) / Halifax (annual comparison by quarter)
Nevertheless, Halifax forecasts that property prices should continue to rise between 0% and 3%. Their forecast assumes;
• Demand for houses remains more or less the same over the next year
• Strong employment and relatively low mortgage interest rates
• Subdued supply from shortages of properties for sale
• Weak levels of new house building
Slower price growth is not welcomed by ‘investors’, but it is good news for first-time buyers who want to get on the housing ladder and are an important part of the housing ‘food chain’. A healthy residential property market is important for the economy – it adds more jobs and underpins consumer confidence.