London house prices booked a steep 1.4 per cent annual drop in August as UK house prices grew at a lower level than last year, according to the latest data.
While UK house prices posted annual growth of 1.3 per cent to beat that of 0.8 per cent in July, growth dipped below last year’s level amid a general slowdown.
London fuelled the drop as the capital suffered the UK’s biggest annual fall. followed by a 0.6 per cent decline in south east house prices.
That left the average UK house price worth £235,000 in August, the Office for National Statistics (ONS) said.
London house prices dropped to an average of £472,753.
“Annual growth in UK house prices showed a moderate pick-up in August although it remains below the increases seen throughout 2018,” ONS head of inflation Mike Hardie said.
“Wales saw the strongest growth with prices continuing to fall in London and the south east.”
Experts said the latest statistics painted a “picture of a housing market in limbo” as London suffered the worst effects of political uncertainty on the UK housing market.
“The closer we come to an apparent EU exit, the more likely it is that even the most fearless home buyer or seller will hold tight until the dust has settled,” warned Benham and Reeves director Marc von Grundherr.
“Further downward trends should be expected until the start of next year at the very least.”
Jeremy Leaf, a former residential chairman of the Royal Institution of Chartered Surveyors, said the latest figures show a small recovery in the housing market.
“Sadly, this is nothing to get too excited about because the market remains relatively flat although of course the resilience is welcome,” he added.
Better affordability and almost record-low mortgage rates are improving buyers’ and sellers’ confidence, he added.
Brexit leaves UK house prices in ‘growth rut’
However, property lender Octane Capital’s chief executive, Jonathan Samuels, warned that Brexit has left the UK housing market in a “growth rut”.
“With Brexit hanging over it, it’s as if the property market is frozen in a one per cent annual price growth rut,” he said.
“Very low single digit growth has been the narrative for well over a year now and it’s hard to see that changing anytime soon,” he added.
“London and the south east remain the primary drag on average prices, as they pay for the riotous growth of five or six years ago.
“While the market is down, low supply and stock levels, cheap mortgages and the strong jobs market are ensuring a degree of movement.”
Brexit endgame could increase volatility
Samuels warned that UK house prices could grow more volatile as the urgency for a Brexit deal increases
“We’re now approaching the Brexit endgame and the ride could get increasingly bumpy.
“It’s possible that what happens during the next few months, even weeks, could determine the fate of the property market over the next few years.”
London house prices ‘must end boom or bust cycle’
Gareth Lewis, commercial director of property lender MT Finance, said London house prices must show more modest growth to end their volatility.
“It may be the case that London and the south east need more sensible levels of price growth in order to produce a more robust market, rather than boom and bust,” he said.
EY Item Club economic adviser Howard Archer said the data showed a “renewed softening” in London house prices. He pointed out that it is the 14th successive month of decline for the capital.
Economy ‘too weak’ to prop up UK house prices
UK house prices and London house prices could benefit from a lack of housing supply, Archer predicted.
But he warned that the UK economy may not hold up house prices for much longer, a day after the unemployment rate inched upwards.
“The government’s recent – and ongoing – initiatives to boost house building will take time to have a significant effect so are unlikely to markedly influence house prices in the near term at least,” Archer said.
“However, the labour market has recently faltered and it looks likely to continue to do so in the near term at least as companies face a soft domestic economy, heightened Brexit uncertainties, an unsettled domestic political situation and a challenging global environment.”
“With the economy largely struggling and the outlook highly uncertain, we suspect that house prices will remain soft in the near term at least,” Archer added, predicting a one per cent rise across 2019.
PwC economist Jamie Durham disagreed, saying wage growth and unemployment remained sturdy supports for the housing market.
“But continued uncertainty in the market, related to Brexit among other factors, is likely to be dampening both supply and demand,” he added. “This is particularly the case in the capital and will likely continue to affect price growth over the coming months.”
More to follow.