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| Cost of living squeeze dents UK house price growth | Cost of living squeeze dents UK house price growth |
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| Low mortgage rates and property shortage prevents bigger slowdown, as London prices fall for first time in eight years | |
| Angela Monaghan | |
| Thu 4 Jan 2018 09.47 GMT | |
| Last modified on Thu 4 Jan 2018 22.00 GMT | |
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| UK house prices increased just 2.6% in 2017 while prices in London fell for the first time in eight years, according to the leading mortgage lender Nationwide. | UK house prices increased just 2.6% in 2017 while prices in London fell for the first time in eight years, according to the leading mortgage lender Nationwide. |
| This followed an increase of 4.5% in 2016 and was the slowest rate of annual growth since 2012, as households constrained by falling real pay grew increasingly reluctant to commit to major spending decisions. | This followed an increase of 4.5% in 2016 and was the slowest rate of annual growth since 2012, as households constrained by falling real pay grew increasingly reluctant to commit to major spending decisions. |
| Nationwide said price growth was likely to slow further in 2018, to around 1-1.5%, against a backdrop of subdued economic growth and continued pressure on family finances. | Nationwide said price growth was likely to slow further in 2018, to around 1-1.5%, against a backdrop of subdued economic growth and continued pressure on family finances. |
| The average price of a UK home was £211,156 in December, when prices rose by 0.6% over the month. | The average price of a UK home was £211,156 in December, when prices rose by 0.6% over the month. |
| Prices in London fell by 0.5% last year, making the capital the weakest performing region for the first time since 2004, as more buyers were unable to afford to buy a home in the capital. | Prices in London fell by 0.5% last year, making the capital the weakest performing region for the first time since 2004, as more buyers were unable to afford to buy a home in the capital. |
| “In London and the south-east, affordability has become even more challenging, with more people priced out of the market or needing to borrow a greater multiple of their income,” said Robert Gardner, Nationwide’s chief economist. | “In London and the south-east, affordability has become even more challenging, with more people priced out of the market or needing to borrow a greater multiple of their income,” said Robert Gardner, Nationwide’s chief economist. |
| Gardner said it would take a typical buyer nearly 10 years to save for a deposit to buy a home in London, with the average price of a property at £470,922 at the end of last year. | Gardner said it would take a typical buyer nearly 10 years to save for a deposit to buy a home in London, with the average price of a property at £470,922 at the end of last year. |
| Prices rose in every UK region apart from London in 2017. The biggest riser was the West Midlands, where average prices rose by 5.2% to £182,861. It was followed by the south-west, where prices increased by 4.8% to £239,576. | Prices rose in every UK region apart from London in 2017. The biggest riser was the West Midlands, where average prices rose by 5.2% to £182,861. It was followed by the south-west, where prices increased by 4.8% to £239,576. |
| Nationwide said low mortgage rates, high employment levels and a shortage of properties on the market had prevented a bigger slowdown in UK house price growth in 2017. | Nationwide said low mortgage rates, high employment levels and a shortage of properties on the market had prevented a bigger slowdown in UK house price growth in 2017. |
| The lender said the outlook for the housing market in the year ahead was uncertain and highly dependent on the outcome of Brexit talks and the UK’s economic performance overall. | The lender said the outlook for the housing market in the year ahead was uncertain and highly dependent on the outcome of Brexit talks and the UK’s economic performance overall. |
| “How the housing market performs in 2018 will be determined in large part by developments in the wider economy. Brexit developments will remain important, though these remain hard to foresee,” Gardner said. | “How the housing market performs in 2018 will be determined in large part by developments in the wider economy. Brexit developments will remain important, though these remain hard to foresee,” Gardner said. |
| “The UK housing market has been characterised by significant regional disparities in house prices in recent years and it is not clear how Brexit will impact these dynamics.” | “The UK housing market has been characterised by significant regional disparities in house prices in recent years and it is not clear how Brexit will impact these dynamics.” |
| Howard Archer, chief economic adviser to the EY Item Club forecasting group, said 2018 would be “a very challenging year” for the housing market, partly because buyers would be concerned about the potential for higher mortgage costs, after the Bank of England raised interest rates for the first time in a decade in November and indicated that further increases were likely. | Howard Archer, chief economic adviser to the EY Item Club forecasting group, said 2018 would be “a very challenging year” for the housing market, partly because buyers would be concerned about the potential for higher mortgage costs, after the Bank of England raised interest rates for the first time in a decade in November and indicated that further increases were likely. |
| “Housing market activity remains under pressure from squeezed consumer purchasing power, fragile confidence and caution over engaging in major transactions,” Archer said. “Potential house buyers are also likely concerned about the possibility of further interest rate hikes in 2018 following November’s increase. We see house prices rising by a modest 2% in 2018.” | “Housing market activity remains under pressure from squeezed consumer purchasing power, fragile confidence and caution over engaging in major transactions,” Archer said. “Potential house buyers are also likely concerned about the possibility of further interest rate hikes in 2018 following November’s increase. We see house prices rising by a modest 2% in 2018.” |
| Household finances have come under renewed pressure since the Brexit vote, which drove a sharp fall in the value of the pound and pushed up the price of goods imported from abroad. | Household finances have come under renewed pressure since the Brexit vote, which drove a sharp fall in the value of the pound and pushed up the price of goods imported from abroad. |
| That in turn has pushed up inflation, currently running at 3.1%, which is well ahead of the Bank of England’s 2% target and above current pay growth of 2.3%, signalling a fall in real pay. | That in turn has pushed up inflation, currently running at 3.1%, which is well ahead of the Bank of England’s 2% target and above current pay growth of 2.3%, signalling a fall in real pay. |
| The Mortgage Advice Bureau said the housing market in 2018 was likely to be similar to the market in 2017, with first-time buyers – particularly in London – struggling to get on the housing ladder. It expects regional variations to continue this year, with prices rising faster in some areas than others over the next 12 months. | The Mortgage Advice Bureau said the housing market in 2018 was likely to be similar to the market in 2017, with first-time buyers – particularly in London – struggling to get on the housing ladder. It expects regional variations to continue this year, with prices rising faster in some areas than others over the next 12 months. |
| Nationwide said the variation in regional affordability had increased in the past decade. Affordability improved in Wales, Scotland and the north of England, but the biggest improvement was in Northern Ireland following the sharp fall in house prices, which are still around 40% lower than they were in 2007, before the financial crisis took hold. | Nationwide said the variation in regional affordability had increased in the past decade. Affordability improved in Wales, Scotland and the north of England, but the biggest improvement was in Northern Ireland following the sharp fall in house prices, which are still around 40% lower than they were in 2007, before the financial crisis took hold. |
| Prices in London however are 55% above their 2007 peak, while those in the north and Yorkshire and Humberside are still lower than they were in 2007. | Prices in London however are 55% above their 2007 peak, while those in the north and Yorkshire and Humberside are still lower than they were in 2007. |
| Alex Gosling, founder of the online estate agents HouseSimple.com, said UK house price growth of 2.6% in 2017 showed the housing market was “fundamentally in a very healthy state”. | Alex Gosling, founder of the online estate agents HouseSimple.com, said UK house price growth of 2.6% in 2017 showed the housing market was “fundamentally in a very healthy state”. |
| “Considering that Brexit doom-mongers predicted that property prices would plummet after the Brexit vote and article 50 being invoked, the housing market has proved surprisingly resilient in 2017,” he added. | “Considering that Brexit doom-mongers predicted that property prices would plummet after the Brexit vote and article 50 being invoked, the housing market has proved surprisingly resilient in 2017,” he added. |
| “The major surprise was undoubtedly the slowdown in London house prices. It’s been 13 years since the capital sat at the bottom of the house price growth table, and since then we have seen prices surge to unprecedented and unaffordable levels.” | “The major surprise was undoubtedly the slowdown in London house prices. It’s been 13 years since the capital sat at the bottom of the house price growth table, and since then we have seen prices surge to unprecedented and unaffordable levels.” |
| • Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here. | • Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here. |
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