Worried about price growth stalling? We examine the facts.

House price growth has slowed, according to official figures, with the monthly growth rate just under 0.5 percent.

The 4.7 percent rise in the year to April brought the average UK property price to £221,000. Price Waterhouse Cooper analysts say this year’s growth will be just 3.7 percent, while Capital Economics predict 2 percent.

The slowed growth rate comes at the same time as a general slowing of housing market activity. The number of properties for sale per real estate agent branch is at a record low, and transactions also falling, particularly in London.

London’s price increase was the second most sluggish in the country, up just 3 percent.

What’s behind the figures? 

Although sellers won’t be happy with the state of the market, buyers will be jumping for joy. And although there’s been much talk of London’s high-end property taking a hit, there is evidence that the changes aren’t exclusive to the capital, and in fact, are being felt around the whole country.

Let’s have a look at the contributing factors:

  • Brexit: the EU referendum impacted all the country’s markets, but property has seen the biggest changes. The “yes” vote saw people slam on the brakes, deciding to put their property purchase off until things looked a little more settled. This contributed to a 9 percent drop in the number of people moving home in the latter half of 2016.
  • Low wages: wages have failed to grow by much at all over the past few years, with recent data showing that in the years between 2007 and 2015, the UK was the only advanced economy in which wages did not grow in line with the economy. Coupled with rising living costs, and possible job insecurity, more people are choosing to stay put rather than upsize.
  • Mortgages: although interest rates are low, the number of mortgage approvals has just hit a seven-month low. This is due to a new rule decreeing that banks can only lend more than 4.5 percent of the borrower’s salary to 15 percent of their clients, which means saving the required deposit is almost impossible for many first-time buyers.

So, is there a slowdown?

While growth has stalled, it hasn’t stopped completely. In fact, industry insiders expect house prices will grow by 13 percent in the next four years. This is down to undersupply of housing stock. More homes are being built but only half as many as required. 

An elderly population will also drive growth. Twenty-five percent of the UK’s population will be over 65 by 2030, and this demographic are staying put in their homes, contributing to undersupply, and pushing prices higher.

Mert Altinisik of Property UK says while price growth has slowed, potential buyers have nothing to fear.

“What we’re seeing is simply a change in market direction. Growth is remaining above inflation and low interest rates are helping investors achieve extremely high returns. I’m optimistic - and so are my investor clients, who are taking advantage of a slower market to get a foot in the door.”

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