UK house prices: Growth slows for the first time in 2015

Billy Ehrenberg
Follow Billy
House prices are continuing to increase more quickly than average earnings (Source: Getty)

UK house price growth has fallen on a three-month basis for the first time in 2015, according to Halifax.

The figures

For the three months to April 2015, house prices in the UK grew 2.2 per cent, lower than the last three months, when it was 2.6 per cent.

On a monthly basis prices rose by 1.6 per cent, while the annual average increase rose from 8.1 per cent to 8.5 per cent.

The changes put the average selling price of a house at £196,412.

Why it’s interesting

The housing market is often seen as a bellwether for the economy, and there has been good news this year. GDP, despite slowing slightly in the last quarter, has been strong, jobs growth impressive and inflation very low.

However, house price growth is still handily outpacing earnings growth, which means the affordability gap is growing. The 8.5 per cent growth is a long way higher than wage growth, which is at 1.8 per cent not including bonuses and 1.7 per cent including bonuses.

What is more, data from the Bank of England has shown there are more risky mortgagees – where the amount borrowed is fore then 4.5 times earnings – than in 2010.

wages including bonuses against three month rolling house price growth and annual house price growth

What Halifax said

Housing demand is being supported by a number of factors including economic improvement, rising employment and low mortgage rates. At the same time, supply remains very tight with a general shortage of properties available for sale. This combination has kept house price inflation steady in recent months with prices increasing by 2.2 to 2.6 per cent on a quarterly basis and at an annual rate of eight to nine per cent.

House prices are continuing to increase more quickly than average earnings despite the return to real earnings growth over the past few months. The resulting rise in the level of house prices in relation to earnings should constrain house price growth and activity over the remainder of the year.

In short

With economic conditions improving, expect house price growth is expected to be steady. However, house price growth is expected to end the year at about 4-5 per cent, so more moderation is probably on the way.

Related articles