British house prices in February fell for the first time in five months. However, economists at lender Nationwide said it won’t last for long.
According to Nationwide’s House Price Index, UK property prices fell by 0.1% in February while annual home price growth slowed for the sixth month in a row.
The annual house price growth slowed to 5.7% in February, from 6.8% in January, which is the the lowest recording since September 2013.
“The pace of housing market activity remains fairly subdued,” said Robert Gardner, Nationwide’s Chief Economist. “There was a small increase in the number of mortgages approved for house purchase in December, up 2% from 59,000 in November to 60,300 in December, though it remains too early to determine whether this marks a turning point in activity.“
However, Nationwide and a number of other experts warned that a drop in UK house prices won’t last for long.
“Despite the increasingly benign economic backdrop, the property market is undergoing a sustained reality check,” said Alex Gosling, CEO of the online estate agents HouseSimple. “But it’s far too premature to suggest that the property market is running out of steam.”
“The strong jobs market, rising real wages and cheap credit are fuelling consumer confidence, and for many renters the homeowning dream remains as attractive as ever. Steady, not stellar, growth is likely to be the pattern for house prices in 2015 – the double-digit rises of 2014 are history.”
Interest rates are still at a record low of 0.5% since 2009. Meanwhile, the Conservative-led government scrapped the old stamp duty slab system. It has since been replaced with a tax on properties that is calculated almost in the same way as income tax. This saved 98% of homeowners thousands of pounds.
Meanwhile, the UK government’s Help to Buy Scheme will continue to help a lot more people get onto the property ladder. Help to Buy lets people pay a 5% deposit while the government guarantees around 20% of the property value.
On top of this, the latest data showed that UK unemployment dropped unexpectedly in December and wages began to climb.
“The broader economic backdrop has remained supportive of housing market activity,” said Nationwide’s Gardener. “Mortgage rates remain close to all-time lows and consumer confidence remains buoyant thanks to a further steady improvement in labour market conditions. Indeed, the unemployment rate has continued to decline and earnings growth has picked up, particularly in inflation-adjusted terms, thanks in part to the sharp decline in energy prices.”