House price inflation has fallen to its lowest level in five years, but buyers will still find that the average home costs almost £10,500 more than a year ago.
The price of the average UK home rose 2 per cent in the year to June to a new record of £215,444, according to the Nationwide house price index.
But this masked a continuing slowdown, with house prices expected to rise just 1 per cent this year and struggling London property sales dragging on the market.
House prices have hit a new record high, according to Nationwide, but the annual rate of growth has been falling since the summer of 2016 and could drop to 1% this year
Britain’s biggest building society forecast a ‘subdued’ property market in the near future.
However, patches of the UK are doing better than others, with house prices in the Midlands up by more than 4 per cent annually, while London fell by 1.9 per cent.
Robert Gardner, Nationwide’s chief economist, said: ‘There are few signs of an imminent change. Surveyors continue to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent.’
Figures show the cost of the average home is near record highs when compared to wages.
Those looking to move in a slower market have been advised to price realistically if they want to get their property sold.
Jeremy Leaf, a north London estate agent and former Royal Institution of Chartered Surveyors residential chairman, said: ‘On the one hand, the squeeze on incomes and unrealistic asking prices is reducing activity and confidence to move, particularly in price-sensitive areas such as London.
‘On the other hand, the market continues to be supported by low interest rates and overall supply shortages, although we have found recently that listings and viewings are on the rise. This will translate into more sales if buyers and sellers recognise the new market realities.’
The cost of the average home has rocketed by about £65,000 since the financial crisis slump
The bounce back in overall UK prices masks the fact that London and surrounding areas are now considerably more expensive than at the 2007 peak, but locations in the North, Wales, Scotland and North Ireland remain under water
More volatile monthly prices showed the cost of the average home climbed by £1,826 in June, or 0.5 per cent, but this was not enough to avoid annual house price inflation falling.
‘Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates,’ say Mr Gardner.
‘Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low.
‘Overall, we continue to expect house prices to rise by around 1 per cent over the course of 2018.’
The cost of the average home is near record highs when compared to wages
Annual house price inflation has varied substantially between the UK’s nations
Nationwide’s figures chime with other house price reports showing the overall UK property market slowing down.
Underlying this, however, major regional cities and the rest of the country are outstripping London and the commuter belt.
London suffered the biggest annual fall in prices of 1.9 per cent, a greater decline than May’s 1 per cent fall, said Nationwide, although the average home there still costs £468,845.
The effect of the slowdown lessens as you move out of the capital, although a ripple effect could lead to a reversal of this throughout the rest of the year.
Homes in the Outer Metropolitan area were up 0.9 per cent annually, while the Outer South East and East Anglia saw prices rise by 2.5 per cent.
In contrast, the biggest annual gains in house prices were seen in the East Midlands, at 4.4 per cent, and West Midlands, at 4.3 per cent, with the average home costing £181,549 and £188,516, respectively, in the locations.
Both areas saw annual house price inflation decline from the 4.5 per cent and 4.9 per cent recorded the previous month.
|Region||Average price||Annual % change this quarter||Annual % change last quarter|
|Yorks & Hside||£155,075||2.10%||4.10%|
|Source: Nationwide BS. Calculations mean quarterly UK average may be different to monthly UK average|
How to buy a home with £10,000 – but is that wise?
It is possible to buy a home without raising a big deposit, if you take a 95 per cent mortgage.
With one of these deals, first-time buyers able to pass mortgage affordability tests could put down a 5 per cent deposit of £10,000 and buy a £200,000 home.
But is that a good idea? Didn’t small deposit mortgages crash the economy a decade ago? Are they not leaving themselves heavily overexposed to falling house prices?
In this podcast we dig into the world of buying a home with a small deposit mortgage, busting the myths and considering the benefits and the risks.
Press play to listen to the show above, or listen (and please subscribe if you like the podcast) at Apple Podcasts, Acast and Audioboom or visit our This is Money Podcast page.