Property prices show signs of cooling

The traditional spring bounce in the housing market failed to materialise this year, according to Halifax’s latest house price index, which showed prices have fallen for the third quarter running.

It is the first time prices have dropped for three consecutive quarters since 2012, the bank said. House prices fell by 1% in June, bringing the average price of a property in the UK to £218,390. The annual rate of growth has fallen to 2.6%, the lowest rate since May 2013.

One of the biggest difficulties facing homebuyers is that real wages are falling more quickly thanks to rising consumer inflation, making owning a property less affordable.

“Although employment levels continue to rise, household finances face increasing pressure as consumer prices grow faster than wages,” said Martin Ellis, Halifax housing economist. “This, combined [with] the new stamp duty on buy to let and second homes in 2016, appears to have weakened housing demand in recent months.”

First-time buyer activity remains strong, however, with the number of first-time buyers (FTBs) reaching an estimated 162,704 in the first half of 2017, only 15% lower than the 190,900 peak in 2006.

In contrast to Halifax, Nationwide reported a 1.1% rise in prices in June, which it said reversed the decline recorded over the previous three months. According to the building society, annual house price growth rose to 3.1% in June, up from 2.1% in May.

“At this point it is unclear whether the increase in house price growth in June reflects strengthening demand conditions on the back of healthy gains in employment and continued low mortgage rates, or whether the lack of homes on the market is the more important factor,” said Robert Gardner, chief economist at Nationwide. He warned that given the ongoing uncertainties around the UK’s future trading arrangements, the economic outlook remains “unusually uncertain” and that housing market trends would depend on “developments in the wider economy”.

Prices currently continue to be supported by the low number of properties for sale, as well as rock bottom mortgage rates. Nationwide said it expects to see a small increase in house prices of around 2% over the course of 2017 as a whole.