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House price growth stagnates for sixth consecutive month

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Annual house price growth slowed to 0.6 per cent in May – marking the sixth consecutive month of sluggish growth across the UK, data has shown.

Prices fell by 0.2% month-on-month across the UK, according to the latest figures released by Nationwide. This compares to an average rise of 0.3%, reported in April 2019.

The report found that the average house price in May remained flat around £214,946.

Robert Gardner, Nationwide’s chief economist, said the data suggested new buyer enquiries and consumer confidence have remained subdued in recent months, while the number of property transactions and mortgages approved for purchase have remained broadly stable.

He added: “First-time buyer numbers have continued their steady recovery in recent quarters, reaching 359,000 in the twelve months to March, just 10 per cent below 2006 peaks. The trend is partly due to robust labour market conditions, with employment rising at a healthy rate, and earnings growth slowly gathering momentum.”

Gardner explained that the cost of servicing the typical mortgage as a share of take home pay has remained close to or below long-run averages in most parts of the country.

He added: “The main exception is in London, where a period of rapid house price growth in the three years to 2015 means that monthly mortgage payments would also be unaffordable for a large proportion of the local population.

“Outside of London and the South East, raising a deposit appears to be the main challenge for most prospective first-time buyers.”

Prices poised for further falls

Jonathan Samuels, chief executive of property finance lending company Octane Capital, noted that the prospect of a no-deal exit from the European Union raises the possibility that prices could fall further over the summer.

“Prices are usually buoyant at this time of the year, but the gravity of political events has brushed any seasonal uplift aside. Amid the political uncertainty, there is a growing realpolitik among buyers. Transaction levels are hardly robust but people are increasingly starting to make their move,” he said.

Despite the chaotic political backdrop, Samuels points out that mortgage rates remain ultra-competitive, the jobs market is strong and Help to Buy is proving a real hit with first-time buyers.

“It’s a buyers’ market and more and more people are making the most of it. If it weren’t for anaemic stock levels, transaction levels would be higher as people get on with their lives,” he added.

Support from first-time buyers

Gareth Lewis, commercial director of MT Finance, a bridging finance lender, agreed that the growing number of first-time buyers entering the market is a positive trend, providing stimulus for onward purchases and sales.

“The cost of mortgages at higher loan-to-values has fallen, which is ideal for those wanting to purchase their property sooner, rather than building up a larger deposit which can take considerable time. If the mortgage isn’t going to cost that much more, why wait?” he said.

“One would have thought first-time buyers would be the most hesitant of all purchasers because they have no experience of buying property but encouragingly, they are getting on and doing it regardless of what is going on at a political level.

“Pricing is subdued but that is what we would expect, given that valuers are being relatively cautious because they know they will be held to account if they are too bullish. So while sentiment is good out there in terms of people transacting, there is still some relative caution with valuers looking at comparables more carefully.”