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House price growth keeps slowing

Written by: Paula John
The rate of UK house price growth slowed for the third month in a row in May - the most sustained reduction since 2009

According to the Nationwide House Price Index, the pace of growth fell from 2.6% in April to 2.1% in May, the lowest rate of growth for four years. The average UK home now costs £208,711 – still an increase on April’s figure of £207,699.

Commenting, Nationwide’s chief economist, Robert Gardner, said: “It is still early days, but this provides further evidence that the housing market is losing momentum. Moreover, 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.”

Impact of general elections on the housing market

Nationwide analysed extensive historic data regarding house buying and selling activity around general elections and concluded that the prospect of going to the polls is unlikely to have any significant bearing on consumer behaviour or house price levels.

Gardener said: “On the whole, prevailing trends have been maintained just before, during and after UK general elections. Broader economic trends appear to dominate any immediate election-related impacts.”

However, the UK’s largest building societies and one of the country’s leading suppliers of mortgages does anticipate a further slowdown in house price growth.

A spokesperson said: “In our view, household spending is likely to slow in the quarters ahead, along with the wider economy, as rising inflation increases the squeeze on household budgets. This, together with mounting housing affordability pressures, is likely to exert a drag on activity and house price growth in the quarters ahead.

“However, the subdued level of building activity and the shortage of properties on the market are likely to provide support for prices. As a result, we continue to believe that a small increase in house prices of around 2% is likely over the course of 2017 as a whole.”

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