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House price growth at lowest levels since 2013

The latest housing stats from Halifax have revealed that house prices in the last three months were up 1.7% against the previous three months. This compared to the 2.3% quarterly rate of change in January, and was the lowest since November 2016.

Between January and February, house prices saw a 0.1% increase following January’s 1.1% decline.

According to Halifax, mortgage affordability is significantly better than a decade ago, up by 18 percentage points since 2007. Typical mortgage payments for new borrowers (both first-time buyers and homemovers) at the historic average loan to value ratio stood at 30% of earnings in 2016 Quarter 4 compared to the peak of 48% in 2007 Quarter 3.

Housing Activity

Total UK home sales on a recent upward trend. Sales in January were 4.9% higher than in December 2016; the fourth successive monthly increase. At 104,820, sales were the highest since March 2016 when transactions were dramatically boosted ahead of the introduction of higher stamp duty rates on second homes and buy to let purchases. In annual terms, sales in January 2017 were almost identical to those in January 2016.

Supply remains very low. The number of properties coming on to the market for sale fell in January after holding broadly steady over the previous three months. This indicator has now failed to increase for 11 successive months. As a result, average stock levels on estate agents’ books remain close to historic lows.

Housebuilding fell by 1% in 2016. New housing completions in England were estimated at 35,980 (seasonally adjusted) in the final three months of 2016. This was 4% lower than in the previous quarter, and 2% below their level in the same quarter in 2015. Overall, completions in 2016 were 1% lower than in 2015. Completions were 43% above their recent trough in the first quarter of 2013, but remain 26% below their recent peak in the first three months of 2007.

Martin Ellis, Halifax housing economist, said: “House prices in the three months to February were 1.7% higher than in the previous quarter; down from 2.3% in January. The annual rate of growth fell to 5.1% from January’s 5.7%, the lowest since July 2013.

Housing demand is being supported by an economy that continues to perform well with employment still expanding. Meanwhile, the supply of both new homes and existing properties available for sale remains low. This combination is pushing up prices.

The annual rate of house price growth has, however, nearly halved over the past 11 months. A sustained period of house price growth in excess of pay rises has made it increasingly difficult for many to purchase a home. This development, together with signs of reduced momentum in the jobs market and squeezed consumer spending power, is expected to curb house price growth during 2017.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: "These figures are interesting as they slightly conflict with the Nationwide survey from a few days ago, although both show a housing market which is broadly stable with prices continuing to be supported by a lack of supply and low interest rates. This reflects what we are finding on the ground.

Looking forward, activity does seem to have picked up a little since the slow start to the year and we hope the Chancellor doesn’t do anything to stop the market in its tracks tomorrow and in particular supports first-time buyer activity."

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "Mortgages may be more affordable than a decade ago, according to the Halifax, but there are still borrowers struggling to get funding, such as older borrowers or the self-employed, because they don’t meet lenders’ tougher criteria. There may be a solution out there but advice is more important than ever. The good news is that lenders are keen to lend and continue to offer competitive deals to attract borrowers."

Russell Quirk, ounder and CEO of eMoov.co.uk, had this to say: “It would seem the cobwebs have been dusted off after the New Year hangover with these latest numbers showing the UK housing market remains resilient and is bouncing back after a seasonally slow start to 2017, reversing the downward trend seen last month.

With prices having increased both annually and monthly, albeit only marginally, it is probable that we will continue to see the property market blossom as we enter into spring, in what is traditionally the busiest time of the year.

However, the continued growth of these numbers could hinge on tomorrow’s budget announcement and whether or not the government decides to actually tackle the shortage of housing in the UK. If they do finally take a step in the right direction price growth could cool to a certain extent, as buyer thirst is quenched with an adequate level of housing stock, although this would be a slow process.

But this is unlikely and relief will probably come in the form of a relax on stamp duty for high-end homeowners which should trickle down to the lower echelons of the market. This ease in market congestion will be as welcome for the average homeowner, as it will be for the beleaguered oligarchs from Marylebone to Kensington Palace Gardens

If this should be the case, the drastic drop in transaction levels seen throughout £1.5m plus market could well be reversed and this additional market activity could further inflate the current market with house prices continuing to increase as a result.”

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