United Kingdom: House price growth continues to peter out in May
May 30, 2017
House prices in the United Kingdom dipped 0.2% in May compared to the previous month in seasonally adjusted terms, coming after April’s 0.4% decline, according to the Nationwide Building Society (NBS). This marked the third month-on-month price decline, something which last occurred in the depths of the 2009 recession. On an annual basis, house prices rose 2.1% in May, down from April’s 2.6% and marking the slowest pace of growth in almost four years. The average house price in May was GBP 208,711 (May 2016: GBP 204,368).
Although news of a cooling property market will be music to the ears of the increasing number of Britons who are struggling to get onto the housing ladder after seeing house price growth outstripping wage growth for many years, it is likely a sign that consumers are feeling squeezed. Pressure on households has been reflected in other economic indicators, such as the slowdown in retail sales growth since the start of the year and the disappointing performance of private consumption in Q1.
There are also more fundamental reasons behind the slowdown, with housing becoming increasingly unaffordable in certain areas of the country, in particular London and the South East, and mortgage servicing costs remaining in line with their long run average. The NBS maintained its forecast for a modest rise in prices this year, as reduced household purchasing power should be offset by the dearth of homes on the market and the longstanding problem of subdued building activity.
Author: Oliver Reynolds, Economist