The latest Nationwide house price index showed that after 15 successive monthly increases, house prices reached £205,904 last month, down from £206,015 in September.
Robert Gardner, Nationwide’s chief economist, said activity in the housing market remained “fairly subdued” as residential property transactions in recent months were around 10% lower than the same period in 2015.
“However, this weakness may still in part reflect the after-effects of the introduction stamp duty on second homes introduced in April, where buyers brought forward transactions to Q1 to avoid additional stamp duty liabilities,” he added. “Policy changes impacting the buy-to-let market may also be playing a role in dampening activity.”
Affordability constraints also played a key role in stagnant house price growth, Gardner said.
Over the past three years, house prices have surged by an average of 20% in contrast to wage growth which has risen by a meagre 6%. Gardner said this meant the typical house now sets a buyer back by six times more than their average earnings, compared to 5.3 times in 2013.
However, Gardner added that buyer confidence was likely to be propped up by “solid” labour market conditions and rock-bottom borrowing costs.
“Moreover, the relatively low number of homes on the market and modest rates of housing construction are likely to keep the demand/supply balance fairly tight, even if economic conditions weaken in the quarters ahead, as most forecasters expect,” he said.
But head of Octopus Property, Mario Berti, raised concerns that “turbulent times” lay ahead for the UK, noting that the UK’s future relationship with Europe would play a driving force in how the performance of the housing market panned out.
“The low interest rate environment, strong labour market and ongoing lack of supply are continuing to support prices. But the return of inflation will lead to a fall in real incomes and that may continue to dampen consumer demand and hit property volumes.
“The triggering of Article 50 is another major hurdle for the UK property market. That makes things official and will test consumer and business sentiment all over again. Factor in the US election and elections on the continent and you have all the ingredients for uncertainty,” Berti added.
“What we negotiate with Europe will arguably shape the medium and long-term performance of the UK property market.”
