Quarterly house price growth has fallen to its lowest level in five years, driven by affordability pressures and the squeeze on household finances.
According to the latest Halifax House Price Index, house prices fell 0.2% between February and April – the first quarterly fall since November 2012.
Annual house price growth remained unchanged at 3.8%, the lowest rate since March 2013.
On a monthly basis, house prices fell by 0.1% between March and April.
Martin Ellis, Halifax housing economist, said: “House prices have stagnated over the past three months.
“Housing demand appears to have been curbed in recent months due to a deterioration in housing affordability driven by the sustained period of rapid house price growth during 2014-16. Signs of a decline in the pace of job creation, and the beginnings of a squeeze on households’ finances as a result of increasing inflation, may also be constraining the demand for homes.
“A continued low mortgage rate environment, combined with an ongoing acute shortage of properties for sale, should nonetheless help continue to underpin house prices over the coming months.”
Halifax expects annual house price growth to slow between 1-4% by the end of the year.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Unfortunately, low mortgage rates and a shortage of property haven’t been enough to support prices, as is reflected in these figures. But on the other hand we are quite encouraged that the annual level is still above where it was this time last year, bearing in mind the huge increase in demand ahead of the introduction of the 3% stamp duty surcharge last April.
“Looking forward, we are finding the market to be relatively balanced between supply and demand and still expect those people who recognise current market conditions to take advantage. The market does seem to be finding a new, slightly lower, level and we are certainly seeing no signs of a more substantial fall.”
Jonathan Harris, director of mortgage broker Anderson Harris, said: “Mortgage lenders continue to offer rock-bottom rates with HSBC’s lowest ever five-year fix at 1.6%, which was launched last week, proof of that. The issue for buyers is affordability and bridging the huge gulf between incomes and house prices.
“There is changing sentiment; the best in class properties are shifting but we are seeing a number of down valuations from surveyors as caution starts to become more prevalent. Vendors are beginning to appreciate that their homes aren’t worth as much as they thought so we are seeing price drops in some areas. This is ultimately better for everyone as people who need to sell will be able to and those who want to buy will also be able to, resulting in a higher number of transactions and better fluidity in the market.”
The figures come after Nationwide reported that house prices fell 0.4% in April, the first time house prices have fallen in consecutive months for nearly five years.
Mortgage approvals also fell to a six-month low in March, a sign homebuyers are becoming increasingly cautious as they start to feel the squeeze on their finances following last year’s Brexit vote.
Figures from the Bank of England showed the total number of mortgages approved fell by over 2,000 to 122,918. It is the second month in a row mortgage approvals have fallen.
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