House prices in the UK have remained in the doldrums in the second quarter of the year with year-on-year increases dropping to 2.1 per cent, according to the latest index from the Halifax.

UK earnings rising slower than consumer prices

In June 2016, the annual rate stood at 8.4 per cent but the rate of increase has declined in all succeeding quarters and is now down to its lowest in more than four years.However, the index, based on Halifax’s mortgage data, did rise 0.4 per cent between June and July, bringing the nationwide average value of a property to £219,266.Russell Galley, managing director at Halifax Community Bank, said, “House prices continue to remain broadly flat, as they have since the start of the year. Improvement in the jobs market has not, as yet, boosted wage growth, resulting in earnings rising at a slower rate than consumer prices.“This squeeze on spending power, together with the impact on property transactions of the stamp duty changes in 2016 now being realised, along with affordability concerns, appear to have contributed to weaker housing demand.” 

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Jonathan Samuels, CEO of the specialist property lender Octane Capital, added, “The UK’s property market is in a steady but decisive slowdown mode. Only the lack of properties for sale is preventing the market from deteriorating more quickly.“While the jobs market is strong, buyers are increasingly feeling the pinch due to stubbornly high inflation and low wage growth. Squeezed finances will invariably see new house purchases put on the back burner.“There is a lot of economic uncertainty right now and the prospect of interest rates rising cannot be discounted. Major question marks around the impact of Brexit are also causing many people to sit on their hands.”Mark Harris, chief executive of mortgage broker SPF Private Clients, said, “Mortgage rates are staying extremely low. This state of affairs has been supporting the housing market to an extent and is likely to continue to do so with no immediate interest rate rise on the horizon.“One of the big issues facing prospective buyers is not so much getting the mortgage they need but finding a property they wish to buy. Until supply improves, this will continue to be the case.”

Market seeing a cooling rather than correction

Jonathan Hopper, managing director of Garrington Property Finders, commented, “There was a time when four falls in a row would have set alarm bells ringing. But so far all the indications are that the market is seeing a cooling rather than a correction.“The speed of price growth has slowed substantially, and at a national level average prices are still flat lining rather than falling. But what growth there is, is meandering and listless, with prices being propped up by record low levels of supply.“On the other side of the equation there is genuine buyer intent, and rumours that the government may review the Help to Buy scheme could add fuel to the fire as some hesitant buyers may be spurred into action by the idea of ‘use it or lose it’.“Yet that demand comes with one big caveat ­ buyers are intensely price sensitive and won't hesitate to walk away from a property being offered at anything other than a highly competitive price.“This stand-off is most acute in London, especially at the top end of the market. The capital's prime property prices have been under pressure for nearly two years and we're increasingly seeing astute buyers seize the opportunity to secure substantial discounts.“As the market settles into its traditional summer lull it's clear there has been no post-election boost to prices. While the lack of supply means there is less choice, the benign interest rate environment and surprisingly stable economy mean that buyers with a good chunk of equity behind them are increasingly able to set the tempo on prices.“Sellers who recognise this and are pragmatic with their pricing are the most likely to be the ones moving this summer.”For related news and features, visit our Residential Property section.

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