On a monthly basis prices dropped by 0.5% against a 0.7% rise in July, recording the largest monthly decline in over six years, according to latest figured released by Nationwide.
Commenting on the figures, Robert Gardner, Nationwide’s chief economist, said that annual house price growth remains within the fairly narrow range of 2-3% which has prevailed over the past twelve months, suggesting little change in the balance between demand and supply in the market.
He added: “Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates.
“Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on house price growth and market activity this year, though borrowing costs are likely to remain low. Overall, we continue to expect house prices to rise by around 1% over the course of 2018.”
How Help to Buy may impact activity in England
The report revealed there were around 48,000 Help to Buy (HTB) equity loan completions in England in the twelve months to March 2018, up 21% on the same period last year.
Gardner said: “The scheme accounted for 8% of total house purchase mortgages in England in the period, though it continues to account for a higher share of activity in the North (10%) and the East Midlands (9%).
“The vast majority of HTB loans were to first-time buyers and while its share of FTB activity has continued to trend upwards, it remains relatively modest at 13% of transactions.
“It is unclear how much HTB activity represents additional demand and how much has simply replaced activity that would already have taken place. The scheme has, however, been a key source of demand for newly built homes in recent years. Indeed, HTB has accounted for more than a third of new build completions in England.
“This is even higher in some regions, such as the North West, where HTB accounted for nearly half of new build purchases.
“It is unclear whether or not the scheme will be extended beyond April 2021, when it is due to expire. However, given the long lead time on many housing developments and the political consensus on the need to increase housing supply, it suggests that the scheme will not come to an abrupt end.”
A Brexit no-deal could hit prices in London
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said there is no sign of any major changes.
He added: “Of course, sellers are more reluctant to come to terms with new market conditions bearing in mind generally lower loan-to-values and large equity stakes built up from previous housing booms whereas outside London higher loan-to-value mortgages seem to concentrate minds and stimulate more activity.”
CEO of Octane Capital, Jonathan Samuels, said while September could well see price growth turn positive once again, the rest of 2018 was shaping up to be uneventful at best.
“There is a blanket of uncertainty covering the UK property market at present. While the employment market remains strong, stubbornly high inflation, the potential for another rate rise, overstretched household finances and the growing possibility of a no-deal Brexit are seeding serious doubt in the minds of prospective buyers.
“A Brexit no-deal could hit prices in the capital, especially at the higher end, like a sledgehammer. You can’t help but think the government is boxing itself into a corner on Help to Buy. Help to Buy is certainly enabling many more people to get onto the property ladder but serious question marks remain over the longer term impact of what is an artificial stimulus.”
Mike Scott, chief property analyst at estate agent Yopa, said that after two strong months in June and July, the dip should not be too concerning.
He added: “While this is the biggest monthly fall on the Nationwide index since July 2012, it’s likely to be just a one-off correction of the previous months, and not the start of a sustained downturn.
“Nationwide is still forecasting a 1% increase in average house prices for 2018 as a whole, but with only four months to go, it now seems likely that the market will do a little better than that. Prices are up by 1.7% for the year to date even with this month’s fall, so it would need a more sustained autumn downturn to hit 1%, and the final figure for the year will probably be closer to 2%.”
Andy Soloman, Yomdel CEO, said that despite a mix of seasonal factors bringing an uplift to the wider economy the UK housing market is yet to feel the benefit.
He added: “When this positive sentiment does finally trickle down to the UK’s home buyers and sellers a continued imbalance of stock available to meet current demand should see price growth pick up in the short-term.
“However, with more interest rate increases on the way at some point down the line and the final Brexit deal still to be negotiated, any positive outlook could soon be overshadowed by darker clouds.
“There is a very good chance that once this European storm front rolls in, the market will once again begin to freeze over until a more stable outcome can provide brighter forecasts for the year ahead.”