According to the Nationwide House Price Index, prices fell 0.2% last month compared to April.
This meant prices rose just 2.1% in the 12 months to May 2017 – down from 2.6% in the year to April.
Following almost two years of price rises hovering around 4% there has been a sharp drop to around 2% this year, where the lender expects this level of price growth to remain. (Click graph to expand.)
This market slowdown has been supported by other data from across the industry.
Results from the Bank of England yesterday showed a continued fall in the number of approvals for property loans this year while the Council of Mortgage Lenders said the market was “moving sideways”.
Nationwide chief economist Robert Gardner (pictured) said economic uncertainty was the main driver of current and short-term market conditions.
“Given the ongoing uncertainties around the UK’s future trading arrangements and the upcoming election, the economic outlook is unusually uncertain, and housing market trends will depend crucially on developments in the wider economy,” he said.
“Nevertheless, 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,” he added.
The slight annual rise leaves the average UK house costing £208,711, while the house price to earnings ratio has remained reasonably steady at around six-times salary for several months. (Click graph to expand.)
Legal & General Mortgage Club director Jeremy Duncombe added that the slowdown in price rises would be welcomed by many,
“Our housing market is still very much regionally divided. While cities such as Birmingham and Manchester are experiencing strong house price growth, in London and the South East, we’re starting to see a slight correction in the eye watering prices we have grown accustomed to,” he said.