LONDON — National house prices are being increasingly squeezed by a big slowdown in wage growth across the UK.
The Halifax House Price Index measured a 0.1% increase in house prices in February, well below the 0.4% consensus.
The three-month average of year-on-year growth also fell to 5.1% from 5.7% in January, below the 5.3% consensus.
A report from the Institute for Fiscal Studies in November last year found that the outlook for British wages was “dreadful” — with the squeeze on pay set to last for more than ten years — and it is starting to affect the property market after decades of runaway price growth.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The slowdown in households’ income growth is increasingly constraining the housing market.
“Year-over-year growth in prices has halved of the last nine months, and it looks set to carry on weakening,” he added.
Prices will likely carry on rising, however — due largely to the UK’s chronic shortage of housing.
Jonathan Hopper, managing director of Garrington Property Finders, said: “The ongoing chronic lack of supply is a significant factor currently underpinning prices.
“Despite renewed focus on housebuilding by the Government, there doesn’t appear to be a quick fix solution that will change the demand / supply imbalance any time soon, although Wednesday’s budget announcements may help make a step towards this.”
Tombs predicts an overall rise of around 2% this year.
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