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House price growth lags further in January

Kit Klarenberg
Written By:
Kit Klarenberg
Posted:
Updated:
30/01/2015

UK house price growth continued to slow in January, declining for the fifth month in a row, according to Nationwide’s house price index.

Annual house price growth dropped to 6.8 per cent in January from 7.2 per cent in December, according to the data.

The index found that the monthly change in prices increased moderately at the start of 2015, growing by 0.3 per cent in January compared to 0.2 per cent in the previous month.

In contrast to sluggish growth of 0.3 per cent in January 2015, house prices increased by 0.5 per cent in January 2013 and climbed further in January 2014 rising by 0.8 per cent.

After taking account of seasonal factors, Nationwide’s index found UK house prices are currently 2.4 per cent above their pre-recession peak.

Nationwide’s chief economist Robert Gardner (pictured) said the minimal pace of growth was “unsurprising” with the number of mortgages approved for house purchase around 20 per cent below the level seen at the start of 2014, with surveyors continuing to report subdued levels of new buyer enquiries.

He said: “Although house price growth continues to outpace income growth by a significant margin, affordability does not appear stretched at a national level. 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.

Gardner predicted that activity in the housing market was likely to stay on track should the UK’s economy improved as forecast.

He added: “It is encouraging that the number of new homes built in England was up 8% in the year to Q3 2014. However, this is still 34% below pre-crisis levels and little over half the expected rate of household formation in the years ahead.”