Nationwide: Annual house price growth slips to 2.2%

“After picking up unexpectedly in January, UK house price growth fell back in February, to 2.2% from 3.2% the previous month. House prices fell by 0.3% over the month, after taking account of seasonal factors.

Month-to-month changes can be volatile, but the slowdown is consistent with signs of softening in the household sector in recent months. Retail sales were relatively soft over the Christmas period and at the start of the new year, as were key measures of consumer confidence, as the squeeze on household incomes continued to take its toll.

Similarly, mortgage approvals declined to their weakest level for three years in December, at just 61,000. Activity around the year end can often be volatile, but the weak reading comes off the back of subdued activity in October and November (approvals were around 65,000 per month compared to an average of 67,000 over the previous 12 months). Surveyors report that new buyer enquiries have remained soft in recent months.

How the housing market performs in the year ahead will be determined in large part by developments in the wider economy and the path of interest rates. Brexit developments will remain a key factor, though these remain hard to foresee. We continue to expect the UK economy to grow at modest pace, with annual growth of 1% to 1.5% in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth."

As usual, the property industry was quick to react. Here's what they're saying:

Lucy Pendleton, founder director of independent estate agents James Pendleton, says: “Cancel that street party, it was just a blip after all. Last month’s optimism has evaporated faster than a snowman on the Equator. The January surge looked just as out of place too but Nationwide had already issued its own spoiler alert for this one.

The firm warned the housing market was slowing earlier this month based on a huge 43% drop in lending at the end of last year.

If they are right, expect a slow rise, slight fizzle, a gentle landing and no major pop as we move into the second half of the year. House price growth will have to tend to  zero at some point if the market is to remain as flat as broadly expected in 2018.

The most likely reason for January’s surprising boost is interest rate anxiety providing people with a reason to get on with their house purchase, pitting them against similarly motivated buyers in key areas. Though borrowing is still relatively cheap, it has been playing on people’s minds.”

Sam Mitchell, CEO, online estate agents HouseSimple.com, comments: "While the country shivers from the full force of the Beast from the East, the housing market is suffering from its own chilly period.

House prices have gone of the boil, particularly in London, and activity remains subdued as we approach the crucial Spring period. Buyers are viewing but are not showing any urgency to offer. The housing market isn't about to suffer a full blown crash, but we have some tough months ahead and a lot of hard negotiating between buyers and sellers if the market is to get back on track.

Buyers definitely hold all the cards at the moment, and the last thing the market needed right now was a blanket of snow covering the country. This is likely to stall activity as buyers will be put off viewing, or may not be able to travel to viewings, until the weather improves. The message to sellers is that if they need to move, they will have to be willing to negotiate with buyers. Hold on for the spring period by all means, but the danger is that the market may be swamped by new properties coming on, and you'll find there will be a lot more competition.

Funnily enough, the terrible weather conditions might be a trump card for motivated sellers. This might be the best time to secure a sale, as home owners who were thinking of marketing over the next week or two, may decide to delay until the snow has melted." 

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "As one of the most closely-watched indicators of property market strength due to its longevity and accuracy, Nationwide’s figures may cause concern. At this time of the year we would have expected an increase, not a fall, in house price growth although of course these figures are in contrast to the previous month’s findings. 

However, it goes to show the limitations of a national snapshot of the market. While Nationwide reports a lack of supply, on the ground, we are finding more balance between supply and demand in our part of London as buyers, spoilt for more choice, hesitate before making commitments and identifying whether they are dealing with serious sellers.’

Jonathan Samuels, CEO of Octane Capital, comments: "With the ongoing financial squeeze on households, you sense the house price slowdown has now begun in earnest.

High living costs, low wage growth, potential rate rises and a lethargic economy in the shadow of Brexit: for consumers, the bad news is in stereo mode. While weak supply and very low borrowing costs will prevent a collapse in prices, it's hard to see 2018 delivering anything other than very low single digit growth. February could go down as the month the big freeze on prices took hold.

 It's a freeze that may last until inflation comes down and there is significantly more clarity on the direction of the economy. For many people, the reasons to buy are being firmly outweighed by the reasons not to buy."

Jeff Knight, Director of Marketing at Foundation Home Loans, commented: “Despite housing prices dropping slightly, affordability remains a challenge. Many face the likelihood of having to relocate outside the capital for a realistic offer – and given sluggish wage growth and lack of available properties as sellers hold their breath, even that is a challenge.

Purchasing a property in today’s market can leave many feeling exhausted and disheartened by the process, particularly if they have previous blips on their credit record. Providing flexible financial options and a sufficient supply of properties to all those wanting to make the ownership goal a reality is crucial, a top-of-the-list priority across the industry.”

Paul Osborn, Chief Executive for Foresters Friendly Society commented: “Even with the dip, the housing market continues to provide a significant challenge for first time buyers. Sluggish wage growth and poor savings rates mean it’s important that those eager to own their own home start saving early and make sure that savings already put aside are made to work hard.

Luckily there are some great products out there that can really help you reach your savings goals. The Lifetime ISA (LISA), designed specifically to help those under 40 years old, offers a 25% boost to annual savings. Despite this, our research shows that although there’s strong awareness of the LISA, just 11% of those eligible are currently taking advantage of the benefits it offers. Saving early and often is important, but so too is choosing the right product along the way. This will provide a much welcome boost to your savings and help bring the goal of home ownership that much closer.”

Nakul Sharma, CEO and Founder of Hostmaker: “This morning’s data is encouraging for the buyers in the capital, with house prices flattening and London moving to a buyers’ market. The figures show that London property market continues to slow, it now takes on average 83 days to sell a house in the capital, meaning properties are left sitting empty. Many sellers are having to forgo some of the considerable price gains of the last few years to attract more buyers and speed up the sales process, while those that are cash rich happy to hang onto the property for now and hope for the market to bounce. In London, we now see offers being accepted 10% below the asking price and sellers having to slash prices to entice buyers.

Landlords that are looking to liquidise assets after the increased regulation and stamp duties will be the ones hardest hit as they are looking for quick sales, leaving them with little option than to sell below market value. Many landlords are unwilling to sell at a reduced price are now turning to homestay platforms to help cover costs while the market adjusts. 

Homestay management proptechs, such as Hostmaker, are utilising the likes of Booking.com and Airbnb to offer landlords a wealth of potential renters who are looking for both long and short-term options and are put off by the traditional estate agents. This does not require any change in planning or usage of the property, unlike traditional buy-to-let properties and therefore offers much more flexibility in an ever-changing market.”

Jeff Knight, Director of Marketing at Foundation Home Loans, added: “Despite housing prices dropping slightly, affordability remains a challenge. Many face the likelihood of having to relocate outside the capital for a realistic offer – and given sluggish wage growth and lack of available properties as sellers hold their breath, even that is a challenge.

Purchasing a property in today’s market can leave many feeling exhausted and disheartened by the process, particularly if they have previous blips on their credit record. Providing flexible financial options and a sufficient supply of properties to all those wanting to make the ownership goal a reality is crucial, a top-of-the-list priority across the industry.”

Paul Osborn, Chief Executive for Foresters Friendly Society,  said: “Even with the dip, the housing market continues to provide a significant challenge for first time buyers. Sluggish wage growth and poor savings rates mean it’s important that those eager to own their own home start saving early and make sure that savings already put aside are made to work hard.

Luckily there are some great products out there that can really help you reach your savings goals. The Lifetime ISA (LISA), designed specifically to help those under 40 years old, offers a 25% boost to annual savings. Despite this, our research shows that although there’s strong awareness of the LISA, just 11% of those eligible are currently taking advantage of the benefits it offers. Saving early and often is important, but so too is choosing the right product along the way. This will provide a much welcome boost to your savings and help bring the goal of home ownership that much closer.”