House prices cool for fifth month


Published: Thursday 29th January 2015 by The News Editor

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The pace of house price growth softened for the fifth month in a row in January, Nationwide Building Society has reported.

UK property values were 6.8% higher this month than they were a year ago, taking the average price to £188,446 and marking the fifth consecutive month that annual house price increases have been falling.

On a month-on-month basis, values were 0.3% higher in January, following a 0.2% monthly increase in December.

House prices reached a string of record highs last year, and for much of 2014 the year-on-year pace of price growth was in double digits, reaching a peak of 11.8% annual growth last June. January’s annual increase is almost half the increase seen last June.

Despite the cooldown in recent months, Nationwide said that average house prices across the country are 2.4% higher now than they were before the financial crisis set in.

Robert Gardner, Nationwide’s chief economist, said: “The further moderation in the pace of price growth is unsurprising, given the slowdown in housing market activity in recent months.

“The number of mortgages approved for house purchase has been around 20% below the level prevailing at the start of 2014 and surveyors continue to report subdued levels of new buyer enquiries.”

He said that a lack of homes on the market for potential buyers to choose from helps to explain why house price growth has remained “fairly robust,” despite signs of buyer demand dropping off since the summer, as this has helped to keep competition for homes strong.

Experts are expecting the pace of housing market activity to pick up again in 2015, against a backdrop of continued low mortgage rates.

Mr Gardner added: “If the economic backdrop continues to improve as we and most forecasters expect, activity in the housing market is likely to regain momentum in the months ahead.”

There have been early signs that the market could be set to pick up in 2015.

Yesterday, the National Association of Estate Agents (NAEA) reported that in December, its members typically had 360 prospective home buyers registered with them per branch in December, marking the highest figure recorded for that month since 2004.

It said that the unusually high figure for that time of year suggests that an overhaul of stamp duty which was announced by the Government in early December has already encouraged more would-be buyers in what would normally have been a quieter month for the housing market.

The reforms to stamp duty mean that it now works in a more similar way to income tax – resulting in a reduction in the duty for 98% of people in the UK who pay it.

And in further evidence of strengthening interest in the market, earlier this month, property search website Rightmove reported having more than 52 million page views on Sunday January 11, marking a new record for the website.

Howard Archer, chief UK and European economist at IHS Global Insight, said he expects house prices to increase by a “solid but unspectacular” 5% across this year.

He said: “In addition to the stamp duty reform enacted in December, support for housing market activity should come from a number of factors: elevated consumer confidence, high and rising employment, and still low mortgage interest rates, especially as the Bank of England may very well now not raise interest rates until 2016.

“In addition, earnings growth finally appears to be firming and we expect it to gradually improve over the coming months. Meanwhile, limited supply of houses is likely to provide support to house prices in some regions over the coming months.”

Published: Thursday 29th January 2015 by The News Editor

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