The latest Nationwide House Price Index (HPI) points to a small fall in house prices in April. However it is the second consecutive month of house price falls and that hasn’t happened for five years.
The UK economy has also suffered a slow down in growth as figures from the National Office of Statistics indicate that GDP grew by just 0.3% during the first quarter of this year. In the last quarter of 2016, gross domestic product increased by 0.7%.
The slower growth in the economy during 2017 has been expected as rising inflation caused by a Brexit weakened pound is hitting consumer spending power.
The 0.3% rate of growth will come as a surprise to Economists, however, as they were expecting 0.4% although these GDP figures are not final and may be revised in the future.
It is a slow down in the services sector that has contributed most to the lower economic activity as consumers have reined back on discretionatry spending such as hotels and restaurants. Rising household and fuel bills are taking their toll as inflation rose to 2.3% in March.
This fall in economic activity during the first three months of the year is almost certainly a result of Brexit issues, whereas pre-election nerves may also be exerting an effect on the housing market.
The Nationwide HPI show that annual house price growth has dipped to 2.6% – its weakest pace for almost four years. This second consecutive month of weakness in the property market could point to election uncertainties as Russell Quirk, as Founder and CEO of eMoov.co.uk explains:
“A further drop in property values certainly seems out of the ordinary for this peak time of year and is almost certainly being influenced by the decision to call a snap election.
The market had shown promising signs of picking up after months of uncertainty caused by the lead up to Article 50 being triggered. But it would seem this latest cat amongst the pigeons has once again caused an unseasonal freeze amongst UK buyers and sellers.
It is likely that this initial drop will be due to a snap election aftershock reverberating across the UK property sector and causing an almost immediate decline in price growth. But the heightened buyer demand that comes with this time of year should soon reverse this, if not before June, then immediately after the election dust has settled.”
Room for optimism
With mortgage rates at record lows, there is room for optimism about the health of the housing market in the months ahead, even with all the political uncertainties, as Robert Gardner, Nationwide’s Chief Economist, points out:
“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.”