- Annual house price growth in the capital slows to 1.2%
- London is now second-worst performing of the 13 UK regions
- Annual growth rate across the UK as a whole increased to 3.1% in June from 2.1% in May
LONDON — Annual house price growth in the capital has slowed to 1.2%, according to Nationwide’s June house price index. That represents the weakest pace of growth in the capital since 2012, and the second slowest pace of the 13 UK regions.
London prices are still by the far the most expensive in the country at an average of £478,142 compared to the UK average of £209,971.
However, it is the first time in eight years that price growth in northern England (West Midlands, East Midlands, Yorkshire & Humberside, North West and North) exceeded that in southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia).
Northern England saw a 3.3% year-on-year increase, while in the south prices were up 2.6%.
London prices have been affected by a number of factors including stagnant wage growth, mortgage affordability, Brexit-related uncertainty, volatile sterling, and stretched valuations.
Across the whole of the UK, Nationwide measured a 1.1% uptick in house prices in June which erased the decline it recorded over the previous three months. The annual growth rate increased to 3.1% from 2.1% in May, above the 1.9% consensus.
UK house price growth, May 2016 to June 2017
Samuel Tombs, chief economist at Pantheon Macroeconomics, said that low mortgage rates and the shortage of homes on the market were keeping prices buoyant across the UK.
He said: “June’s increase in house prices fully reverses the 0.9% decline seen over the previous three months and brings Nationwide’s measure in line with Halifax’s, which has shown a flat trend since the start of the year.
“The recent decline in mortgage rates and the contraction in the number of homes for sale are ensuring that prices hold broadly steady, despite the renewed squeeze on real wages.”
Robert Gardner, Nationwide’s chief economist, said: “UK house prices rebounded in June, with prices rising by 1.1% during the month, erasing the decline recorded over the previous three months. However, monthly growth rates can be volatile, even after accounting for seasonal effects.
“The annual rate of house price growth, which gives a better sense of the underlying trend, continues to point to modest price gains. Annual house price growth edged up to 3.1% from 2.1% in May. In effect, after two sluggish months, annual price growth has returned to the 3-6% range that had been prevailing since early 2015.
“There has been a shift in regional house price trends. Price growth in the South of England has moderated, converging with the rates prevailing in the rest of the country. In Q2 the gap between the strongest performing region (East Anglia, which saw 5% annual growth) and the weakest (the North, with 1% growth) was the smallest on record, based on data going back to 1974. Nevertheless, when viewed in levels, the price gap between regions remains extremely wide.”
While individual month-on-month indexes are subject to volatility, year-on-year trends point to a major loss of momentum in the UK housing market. Every major house price index indicates that prices have levelled in the last 12 months after years of runaway growth.