Annual house price growth slowed again in July as the squeeze on spending power continues to bite.
According to the latest Halifax House Price Index, annual house price growth eased to 2.1% in July, down from June’s figure of 2.6%.
On a quarterly basis property prices were 0.2% lower than in the previous three months. This is the fourth successive quarterly fall – the first time this has happened since November 2012.
Monthly house prices edged up by 0.4% during July following a 0.9% fall in June, taking the average price of a property to £219,266.
The lender said that the growing squeeze on household finances and higher stamp duty introduced on buy-to-let and second homes was weighing on demand.
Russell Galley, managing director at Halifax Community Bank, said: “This squeeze on spending power, together with the impact on property transactions of the stamp duty changes in 2016 now being realised, along with affordability concerns, appear to have contributed to weaker housing demand.
“However, a continued low mortgage rate environment, combined with an ongoing shortage of properties for sale, should help continue to support house prices over the coming months.”
The housing market has slowed significantly since last July when annual growth was at 8.4%.
Since last year’s Brexit vote, consumers have faced a loss in spending power as a result of rising inflation following a fall in the pound.
Combined with slowing wage growth, households are beginning to feel the pinch as their disposable incomes start to fall. This has led to many buyers adopting a more cautious approach and putting off purchases.
The drop in annual house prices contrasts with the slight rise recorded by Nationwide last week.
Nationwide said that the lack of homes on the market was supporting house prices, with property values expected to go up by 2% over 2017 as a whole.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Low levels of properties coming to the market for sale combined with increasingly competitive rates being released by lenders and ongoing buyer confidence mean that the fundamentals are in place to sustain the current direction of travel for the UK housing market over the coming months.
“Given that prices are now reaching all-time highs, a subdued level of house price growth for the rest of 2017 may not be such a bad thing.”
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