UK house prices continue to move upwards – Nationwide
Updated / Wednesday, 1 Mar 2017 08:24
UK house price growth accelerated in February, with the average property value standing 4.5% higher than a year ago.
A 0.6% month-on-month price increase in February took the average UK property value to £205,846, new figures from the Nationwide Building Society show.
In January, UK annual house price growth had stood at 4.3% and house prices had increased by 0.2% month-on-month.
Robert Gardner, Nationwide’s chief economist, said a small rise in house prices of around 2% is more likely than a decline over the course of 2017, as low mortgage rates and a dearth of homes on the market continues to support prices.
“Recent data suggests that the UK economy has continued to perform relatively strongly,” he stated.
“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,” the economist said.
“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,” he added.
Mr Gardner also said cash buyers are a more important driver of the housing market than they were a decade ago.
He said the share of cash transactions has increased significantly, from around 20% in 2005-2006 to around 35% in 2008, remaining fairly constant since then.
“The sharp increase in the share of cash purchases in 2007 and 2008 was a function of mortgage transactions declining sharply, rather than the amount of cash transactions increasing,” he explained.
“This reflects the impact of adverse labour market conditions and the tightening of credit conditions during the financial crisis, which limited the number of people able to buy with a mortgage, while fewer such constraints would have applied to cash purchasers,” he added.
UK cash sales rose to a peak of 38.9% of transactions in the first quarter of 2016, as buy-to-let investors rushed to beat a stamp duty hike imposed last April.
The ageing population in the UK is also prompting more cash sales, with people who are downsizing for example being more likely to buy their new home in cash, having paid off their mortgage years ago.
In London, the share of cash purchases tends to be lower than the UK generally, with house prices in the capital being more than double the UK average.