House price growth slows
5th September 2017

The annual pace of house price growth moderated to 2.1% in August, from 2.9% in July, according to figures from Nationwide.

Robert Gardner, Nationwide's Chief Economist, said: “The slowdown to the 2-3% range in recent months from the 4-5% prevailing in 2016 is consistent with signs of cooling in the housing market and the wider economy.

“The economy grew by c.0.3% per quarter in the first half of 2017, around half the pace recorded in 2016. The number of mortgages approved for house purchase moderated to a nine-month low of c.65,000 in June and surveyors have reported softening in the number of new buyer enquiries.

“Nevertheless, in some respects the slowdown in the housing market is surprising, given the ongoing strength of the labour market. The economy created a healthy 125,000 jobs in the three months to June and the unemployment rate fell to 4.4% – the lowest rate for over forty years. In addition, mortgage rates have remained close to all-time lows.

“It may be that mounting pressure on household finances is exerting a drag. Wages have been failing to keep up with the cost of living in recent months and consumer sentiment has weakened. While measures of housing affordability are not particularly stretched at a UK level, pressures are evident in some regions – especially London and the South of England
“Ultimately, housing market developments will depend on wider economic performance. The UK economy slowed noticeably in the first half of the year, and there has been little to suggest a significant rebound in the months ahead.

While employment growth has remained robust, household budgets are under pressure. This suggests that housing market activity will remain subdued.

“Nevertheless, constrained supply is likely to continue to provide support for house prices. The stock of homes on estate agents’ books remains close to 30-year lows and the number of new homes coming onto the market remains subdued.

As a result, we continue to expect prices to rise by around 2.7% over 2017 as a whole.