Average house prices slip down in June but prices rise in some regions over last quarter
Latest figures from the Nationwide released today indicate that average house prices in the UK dropped by 0.1 percent in June when compared to the same time last year, the first time that annual growth has been in negative territory since 2012. On a seasonally adjusted basis, house prices in June were 3.2 percent lower than in April, and also returned a month on month decrease of 1.4 percent. Having said that, UK house prices remain on average 19 percent higher than their 2007 peak.
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Robert Gardner, Nationwide’s Chief Economist commented: “It is unsurprising that annual house price growth has stalled, given the magnitude of the shock to the economy as a result of the pandemic.
“Economic output fell by an unprecedented 25 percent over the course of March and April, almost four times more than during the entire financial crisis.
“Housing market activity also slowed sharply as a result of lockdown measures implemented to control the spread of the virus.
“While latest data from HMRC showed a slight pick-up in residential property transactions from April’s low, in May they were still 50 percent lower than the same month in 2019.”
Robert continued: “With lockdown measures due to be eased in the weeks ahead, housing market activity is likely to edge higher in the near term, albeit remaining below pre-pandemic levels.
“Nevertheless, the medium-term outlook for the housing market remains highly uncertain. Much will depend on the performance of the wider economy, which will in turn be determined by how the pandemic and restrictions on activity evolve, including any behavioural shifts.”
What is evident from this morning’s data, however, is that while the average figure for the UK has moved in a negative direction, that’s not necessarily the case when you look at the how regions have performed individually over the past three months.
The Nationwide report shows that the majority of English regions saw growth, albeit at modest levels and ranging up to five percent in the second quarter of 2020, when compared to the same period in 2019.
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The North West was the strongest performer, with annual price growth of 4.8 percent over the past three months, followed by the South West as the next best performing region, which saw 2.3 percent average increases in property values over the last quarter.
Other areas didn’t fare quite so well, with East Anglia only seeing average increases of 0.7 percent and the North East seeing no average growth at all throughout April, May and June.
Looking at the figures for London Robert Gardener noted: “Annual house price growth in London edged higher, with prices up 2.1 percent in Q2. Average prices in the capital are now just 3 percent below the all-time highs recorded in Q1 2017 and 55 percent above their 2007 levels.”
Guy Gittins, managing director of London estate agency Chestertons agreed, and said: “This is broadly in line with what we expected given the considerable impact that lockdown has had on the housing market. It is encouraging that the fall in June is less than in May and a sign that the market is recovering.
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“Prices were always going to be hardest hit in the first few months of lockdown and we now appear to be in the first phase of recovery and expect prices to begin to level out over the coming months.”
Fellow London agent, Marc von Grundherr, director of Benham and Reeves concured, and added:“The first look at house price values during the most restricted period of lockdown was inevitably going to portray a market on its knees.
“However, the reality is buyers and sellers weren’t so much down and out, just forced to check out momentarily. With such a severe lack of market activity, there was only ever going to be sharp declines across the board, and this is something we know turned 360 degrees overnight once the market did reopen.”
Former RICS residential chairman Jeremy Leaf also observed: “Prices are being kept in check by affordability issues and more supply gradually becoming available. But demand is picking up as some buyers emerge from enforced confinement in unsuitable property and or relationships to take advantage of continuing low interest rates, while sellers are more realistic.”
There are still significant challenges to overcome before the market is back on its feet again, particularly around the availability of mortgages. Figures from the Bank of England this week show that there were only 9,300 approvals for house purchase in May, down 90 percent when compared with February and 86 per cent lower when compared to May 2019.
Mark Harris, chief executive of mortgage broker SPF Private Clients suggested: “It will be a shock for homeowners to hear that average prices fell for the first time in June since December 2012 but it is indicative of how devastating an impact the pandemic has had on the housing market and wider economy more generally.”
Mark continued: “Housing market activity was forced to grind to a halt during lockdown and June has seen the doors re-open and things start to get back to normal. Surveyors have been dealing with the backlog of valuations and lenders are dealing with requests for mortgage payment deferrals, staff getting back to the office and demand, in particular for high loan-to-values.
“As lockdown measures ease further, we expect the market to pick up further. Various government schemes to support the economy and incomes should help ease the pain of the next few months.”
Robert Gardner concluded: “The raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy. These same measures should also help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude.”
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