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The great UK property squeeze

The great UK property squeeze

Political uncertainty is a driving factor behind the recent dip in the housing market, an expert has warned. 

Malcolm Simpson, IFA at Winchcombe-based Sandringham Financial Partners, said he believes the fall in house prices is due to a combination of factors including Brexit and the general election results.

He said: “Future house market trends will be governed by developments in the wider economy. Given that the annual percentage change in house prices in March 2016 stood at 5.7 per cent and is now 2.1 per cent – and we have since had a Brexit referendum result and a general election resulting in no majority – I expect the political uncertainty will continue as a driver. Given that we have had three consecutive monthly falls for the first time in four years, I personally would not be surprised if that trend continued further; however, predicting house price movements is notoriously difficult.”

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This comes as Nationwide announced the average cost of home fell 0.2 per cent last month –  with price growth slowing further in 2017 as inflation squeezes household income.

Mr Simpson added that despite the fall in house prices, he had not seen a rise in investors seizing this as an opportunity to add to their buy-to-let property portfolio. However, he believes this is due to other factors, including the 3 per cent hike in stamp duty rates from April 2016. He added: “What history shows us is that whenever a government gives advance notice of increases in stamp duty it results in a bubble and then a slowdown or even a fall in house prices.”

The fall in house prices was further dragged down by the annual growth rate in May, to 2.1 per cent – the lowest in nearly four years – indicating that the market is losing steam, according to Nationwide. 

Robert Gardner, Nationwide's chief economist, said that although it is still early days, this provides evidence that the housing market is losing momentum. He added: “This may be indicative of a wider slowdown in the household sector, though data continues to send mixed signals in this regard. 

“While real incomes are again coming under pressure as inflation has overtaken wage growth, the number of people in work has continued to rise at a healthy pace. Indeed, the unemployment rate fell to a 42-year low in the three months to March.”

He insisted that if history is any guide, the slowdown is unlikely to be linked to election-related uncertainty. 

He added: “Housing market trends have not traditionally been impacted around the time of general elections. Rightly or wrongly, for most home buyers, elections are not foremost in their minds while buying or selling their home.”

The lack of confidence in house buyers was also reported by Halifax. Martin Ellis, Halifax housing economist, said housing demand appears to have been curbed despite the fact that annual house price growth fell to 3.3 per cent in May, after reaching a peak of 10 per cent in March 2016. He said: “Housing demand appears to have been curbed in recent months due to a deterioration in housing affordability driven by the sustained period of rapid house price growth during 2014 to 2016.