Regional House Price Growth Disparities Shrink

Recent figures have indicated an annual fall in the growth of house prices, with 2017 concluding at a rate of 2.6% compared to 4.5% the previous year.

According to the Nationwide house price index, the slowdown was largely predicted, with the bank also expecting housing market activity to be largely influenced by wider factors throughout the economy.

In England, average house prices grew by 0.5% in Quarter 4 of 2017, up 2.1% on an annual basis. To put this into context, this is the most modest annual growth since 2012, with prices during this year dropping by 0.4% over 12 months.

Regionally speaking, the West Midlands showed the strongest growth for the first time ever last year, with an average annual increase of 5.2%.

In contrast, London showed the weakest performance, with prices dropping by 0.5%; the first fall for the city in eight years. This, according to Nationwide, represents a change in the current market trend.

The most significant slowdown in prices was observed in East Anglia, the region which topped the table in 2016. On average, price growth was down from 10.1% to 2.3% last year.

When looking at these figures, it’s clear that house price growth in 2017 has certainly seen a change. Recorded at just six percentage points at the end of Q4, the margin between the strongest and weakest performing regions is at an all time low.

Commenting on the data was Robert Gardner. The Chief Economist from Nationwide highlighted the impact of wider economic factors as well as expected gains in the near future.

“How the housing market performs in 2018 will be determined in large part by developments in the wider economy. Brexit developments will remain important, though these remain hard to foresee.

“We continue to expect the UK economy to grow at modest pace, with annual growth of 1% to 1.5% in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.

“Nevertheless, housing market activity is expected to slow only modestly, since unemployment and mortgage interest rates are expected to remain low by historic standards. Similarly, the subdued pace of building activity evident in recent years and the shortage of properties on the market are likely to provide ongoing support for house prices.

“Overall, we expect house prices to record a marginal gain of around 1% in 2018. Over the longer term, once the economy regains momentum, we expect house prices to rise broadly in line with earnings (around 3%-4% per annum), though if the rate of house building fails to keep up with population growth, prices may outpace earnings once again, as they have in recent years.

“As noted above, the UK housing market has been characterised by significant regional disparities in house prices in recent years and it is not clear how Brexit will impact these dynamics. Much will depend on the nature of the Brexit impact on the UK economy (in terms of its impacts on different sectors and the resulting geographic consequences).”

Source: TodaysConveyancer