Mortgages  

House price growth slows again in January

House price growth slows again in January

Annual house price growth continued to slow at the start of 2015, with the rate of value inflation dropping for a fifth consecutive month in January on the back of a modest monthly.

The Nationwide monthly house price index showed that UK house prices rose by 0.3 per cent in January, up from 0.2 per cent in December, with the average price sitting at £188,446. On an annualised basis prices rose by 6.8 per cent, down from 7.2 per cent.

Robert Gardner, chief economist at Nationwide, noted that taking account of seasonal factors, UK house prices are currently 2.4 per cent above their pre-crisis peak.

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He 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 per cent below the level prevailing at the start of 2014 and surveyors continue to report subdued levels of new buyer enquiries.”

The reasons for the slowdown in activity remain unclear, according to the building society, given that unemployment has continued to decline and wage growth has started to outstrip increases in the cost of living for the first time since the financial crisis on the back of the slump in oil prices.

Surveys also suggest that consumer confidence remains elevated, a view corroborated by healthy gains in retail sales over recent months.

Mr Gardner stated that although house price growth continues to outpace income growth, affordability does not appear stretched at a national level.

He said: “The cost of servicing a typical mortgage remains close to the long run average as a share of take home pay, in part thanks to the ultra-low level of mortgage rates.

“Supply side developments are crucial in determining the pace of price growth. Surveyors continue to report a dearth of new homes coming on to the market, which may help to explain why house price growth has remained fairly robust, despite a more noticeable decline in housing demand since the summer.”

He added, in contrast to some predictions that house prices could actually decline this year, that if the economic backdrop continues to improve Nationwide expects activity in the housing market to regain momentum.

Mr Gardner said: “It is encouraging that the number of new homes built in England was up 8 per cent in the year to the third quarter of 2014. However, this is still 34 per cent below pre-crisis levels and little over half the expected rate of household formation in the years ahead.”

peter.walker@ft.com