House prices growth continues to be weak, below 1% year on year for fifth month in a row

House price growth was weak in the 12 months to April 2019, up just 0.9% to an average of £214,920, the latest lender index shows.

Month on month average prices increased by only 0.4%, according to the report from lender the Nationwide which also indicates that April is the fifth month in a row that annual price growth has been under 1%.

‘Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, even though survey data suggests that sentiment has softened,’ said Robert Gardner, Nationwide’s chief economist.

He pointed out that measures of consumer confidence weakened around the turn of the year and surveyors report that new buyer enquiries have remained subdued. ‘While the number of properties coming onto the market has also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of supply and demand in favour of buyers in recent months,’ he explained.

‘While the ongoing economic uncertainties have clearly been weighing on consumer sentiment, this hasn’t prevented further steady gains in the number of first time buyers entering the housing market in recent quarters,’ he said.

‘Indeed, the number of mortgages being taken out by first time buyers has continued to approach pre-financial crisis levels in recent months. First time buyer numbers have been supported by the strength of labour market conditions, with employment rising at a healthy rate, and earnings growth slowly gathering momentum,’ he added.

He also pointed out that while house prices remain high relative to average earnings, low mortgage rates have helped to support mortgage affordability. ‘Indeed, raising a deposit appears to be the major barrier for prospective first time buyers, since the cost of servicing the typical mortgage remains in line with or below long run averages as a share of take home pay in most regions of the UK,’ said Gardner.

But the exception is in London and parts of the south of England where affordability pressures are more acute, and the monthly cost of servicing a mortgage, as well as raising a deposit, poses a greater challenge. ‘Comparing the incomes of actual first time buyers in 2018 with average incomes in each region highlights how affordability pressures vary across the UK,’ he explained.

‘In 2018, first time buyer incomes were in line with or below average incomes in most regions. However, in the East, South East and London, first time buyers’ incomes were significantly higher than average incomes in those region, some 60% higher in London, illustrating the extent to which many prospective buyers are priced out of the market in those areas,’ he added.

According to Kevin Roberts, director of Legal and General Mortgage Club, it is welcome news that house prices are growing annually and importantly at more sustainable levels as it allows buyers to make better estimations about what they need to save to get onto the property ladder and making it easier to build their deposit.

‘Near record low interest rates and increased competition from lenders have also put buyers in a good position to make their first or next move,’ he added.

The market now needs to look beyond Brexit, according to Gary Barker, chief executive officer of Reapit. ‘Ultimately, people need to move home and housing needs outweigh uncertainty. We’re already seeing an uptick in activity as highlighted in the recent Rightmove report, suggesting that the family home sector was outperforming other sectors in key areas such as holding their value better and seeing a greater willingness to come to market,’ he said.

He believes that the Government should now consider encouraging the market by looking at how stamp duty is deterring second-steppers and downsizers. ‘Addressing issues of supply and incentivising movement in the market will prove essential for the future of the sector,’ he added.

While not ideal for current sellers, the slowdown opens a window for first time buyers who already have a deposit saved up, according to Dilpreet Bhagrath, mortgage expert at online mortgage broker Trussle.

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