House prices grew at their slowest annual rate in almost four years in February amid concerns wider economic pressures could begin to dampen the market.
The annual rate of growth stood at 5.1 per cent last month – down from 5.7 per cent in January and the lowest level since July 2013, according to the latest Halifax house price index.
Prices edged up 0.1 per cent month-on-month, but while economic growth continues to boost demand, the annual rate of price inflation has slowed significantly over the past year and is nearly half the 10 per cent peak reached in March 2016.
The lender’s analysis reveals mortgage affordability is significantly better than it was a decade ago, with the proportion of disposable earnings devoted to mortgage payments improving by 18 percentage points since 2007.
The market continues to be affected by supply pressures, with the number of properties coming on to the market for sale falling in January after holding steady for three months.
Martin Ellis, Halifax housing economist, said: “Housing demand is being supported by an economy that continues to perform well with employment still expanding. Meanwhile, the supply of both new homes and existing properties available for sale remains low. This combination is pushing up prices.
“The annual rate of house price growth has, however, nearly halved over the past 11 months. A sustained period of house price growth in excess of pay rises has made it increasingly difficult for many to purchase a home.
“This development, together with signs of reduced momentum in the jobs market and squeezed consumer spending power, is expected to curb house price growth during 2017.”
Despite ongoing attempts by the government to stimulate residential construction, housebuilding also fell by 1 per cent in 2016, with new housing completions in England estimated at 35,980.
Bob Riach, at Scunthorpe-based Riach Financial Advisers, said: “I always find that when looking at property value they are looking at the UK as a whole, but we are seeing different trends in different areas.
“In the north, we tend to catch up a bit later. I am finding property prices are not changing in our area. I am as busy as I have been for a long time, mortgage-wise. We are finding prices are pretty stable – they are not declining but are not rising much, either. I think these statistics are exaggerated because of London.
“I think what we are getting nowadays is more first-time buyers, and that is a lifestyle change. Young couples who wanted to leave home a decade ago would go renting and now they want to go straight into buying, which is understandable - once they start renting it is very difficult to save a deposit.”
simon.allin@ft.com
