House price freeze sets in during January with growth nearly at a standstill

A house price freeze set in during January, with property values showing near-zero growth compared with a year ago.

House prices edged up by just 0.1% year on year in January, Nationwide Building Society said.

Annual house price growth slowed down from a 0.5% increase in December and 1.9% growth in November.

It was the smallest annual increase for the index since February 2013 when a 0% uplift was recorded.

Two years earlier, in January 2017, annual house price growth was running as high as 4.3%.

Across the UK, average house price now stands at £211,966, up 0.3% month on month in January.

A 0.7% month-on-month house price fall was recorded in December.

Robert Gardner, Nationwide’s chief economist, said the housing market has shifted slightly more in favour of buyers in recent months.

He said: “Annual house price growth almost ground to a complete halt in January, with prices just 0.1% higher than the same time last year. This follows a subdued December, when price growth slowed to 0.5%.

“Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, but forward-looking indicators had suggested some softening was likely.

“In particular, measures of consumer confidence weakened in December and surveyors reported a further fall in new buyer inquiries towards the end of 2018.

“While the number of properties coming on to the market also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers in recent months.”

Mr Gardner said the uncertain economy is likely to be acting as a drag on the housing market, against a backdrop of other factors supporting the market such as solid employment growth, stronger wage growth and continued low borrowing costs.

He continued: “Near-term prospects will be heavily dependent on how quickly this uncertainty lifts, but ultimately the outlook for the housing market and house prices will be determined by the performance of the wider economy – especially the labour market.

“The economic outlook remains unusually uncertain.

“However, if the economy continues to grow at a modest pace, with the unemployment rate and borrowing costs remaining close to current levels, we would expect UK house prices to rise at a low single-digit pace in 2019.”

Commenting on Nationwide’s findings, Howard Archer, chief economic adviser at EY Item Club said: “If Brexit is delayed, ongoing uncertainty is likely to weigh down on the housing market and could well see house prices stagnate or fall slightly.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The uncertainty created by Brexit largely is responsible for the further decline in year-over-year growth in house prices to near-zero, from a broadly stable rate of about 2% in the 18 months before November.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Uncertainty seems to be the main issue plaguing the housing market, with potential buyers and sellers sitting on their hands and waiting to see what happens with Brexit.

“However, lenders won’t be put off. They have started this year the way they finished the last one – keen to lend and offering some competitive products to encourage borrowers to take the plunge.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: “Although not showing much change, these figures confirm a market struggling to weather the Brexit storm but not collapsing.

“The (month-on-month house price) fall in December has been replaced by a modest rise in January but this is probably just as much to do with shortage of stock as release of some inevitable pent-up demand in the post-Christmas period.

“Looking ahead, there are probably too many potential bumps on the road to give a clear steer as to the future direction of prices and activity but what is apparent is that there remains a determination among a good number of serious buyers and sellers to find a way of moving on.”