House prices post 'surprising' growth despite slow market

House prices post 'surprising' growth despite slow market

House price growth accelerated in January despite a softening of the market over the Christmas period, according to the Nationwide house price index.

The monthly survey, conducted by Britain's second-largest mortgage lender, found house prices increased by 3.2 per cent in January on an annual basis.

This was an increase from the 2.7 per cent increase recorded in December - though month-on-month house price growth remained at 0.6 per cent.

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According to Nationwide the average house price in the UK is now £211,756.

But Robert Gardner, Nationwide's chief economist, said the sudden acceleration in house price growth was "surprising" given the softening of the market in recent months.

He said: "Retail sales were relatively soft over the Christmas period, as were key measures of consumer confidence, as the squeeze on household incomes continued to take its toll.

"There are few signs of an imminent pickup, as surveyors report that new buyer enquiries have remained soft in recent months.

"But activity has been subdued on both the demand and supply side of the market. The flow of properties coming onto estate agents’ books has been more of trickle than a torrent for some time now and the lack of supply is likely to be the key factor providing support to house prices."

Earlier this week the Bank of England reported the number of mortgage approvals took a sharp, sudden drop in December.

According to the seasonally adjusted figures, the total number of mortgage approvals fell to 121,482, a fall of more than 10,000 from the previous month.

Annual house price growth has slowed somewhat over the past year, with the figure for January this year representing the fastest growth since March 2017 while at the beginning of last year, house prices were increasing by as much as 4.3 per cent.

In four of the past 12 months house prices fell marginally on a month-on-month basis - by as much as 0.4 per cent in April 2017.

Mr Gardner said: "We continue to expect the UK economy to grow at modest pace, with annual growth of 1 per cent to 1.5 per cent in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.

"Nevertheless, housing market activity is expected to slow only modestly, since unemployment and mortgage interest rates are expected to remain low by historic standards.

"Similarly, the subdued pace of building activity evident in recent years and the shortage of properties on the market are likely to provide ongoing support for house prices."