House price growth edged up slightly last month after hitting a 14-month low in January, according to Nationwide.
Its latest House Price Index shows that annual house price growth was 4.5% in February, slightly up from the 4.3% recorded in January.
On a monthly basis house prices rose 0.6% to £205,846.
Robert Gardner, Nationwide’s chief economist, said: “The outlook is uncertain, but we, along with most other forecasters, expect the UK economy to slow through 2017 as heightened uncertainty weighs on business investment and hiring. Consumer spending, a key engine of growth in recent quarters, is also likely to be impacted by rising inflation in the months ahead as a result of the weaker pound.
“Nevertheless, in our view a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices.”
Howard Archer, chief economist at IHS Global Insight, said: “February’s solid looking rise in house prices reported by the Nationwide does not change our view that housing market activity and prices will come under increasing pressure over the coming months from deteriorating consumer fundamentals and weaker confidence.
“Consequently, we suspect that house price gains over 2017 will be no more than 3%.”
Nationwide said that the role of cash buyers had risen significantly in the past decade, hitting a record high of 38.9% at the beginning of last year.
Gardner said: “Cash buyers are a more important driver of housing market dynamics than they were a decade ago. Though the data only extends back to 2005, it suggests that the share of cash transactions increased significantly from around 20% in 2005/06 to around 35% in 2008 and has remained fairly constant since then.”
“The rise in the cash share to an all-time high of 38.9% in Q1 2016 – and the fall back in Q2 – was due to the introduction of stamp duty on second homes from April 2016.
“This policy change prompted investors to bring forward their purchases to Q1 2016 to avoid the additional stamp duty liabilities – a large proportion of these transactions are likely to have been conducted in cash.”
Demographics are also playing a role in boosting the number of cash transactions.
As the proportion of people who own their home outright increases with an aging population, when these people transact – for example, moving home or downsizing – they are more likely to do so in cash.
Jonathan Harris, director of mortgage broker Anderson Harris, said: “While the proportion of cash buyers may be higher than it was a decade ago, the vast majority of people still need a mortgage and are taking advantage of the fact that rates are so low. What’s more, lenders seem keen to lend and that competition should lead to the continuation of cheap rates through the spring.”
