In the days when politics rarely got more exciting than David Cameron forgetting which football team he was supposed to support, house price growth below 1% may have been cause for alarm – now it feels like a cause for celebration.
Annual house price growth remained subdued at 0.8% in November; while this marks a full year since price growth touched 1%, it is the strongest figure since April. After taking seasonal factors into account, prices inched up 0.5% month-on-month.
The price growth of new build properties remains ahead at 2.86% per m² across the UK, according to the LSL New Build Index, however this marks no change from September. However, sales of new builds were down 3.8% on October 2018, according to government data.
Robert Gardner, Nationwide’s Chief Economist, said: “Indicators of UK economic activity have been fairly volatile in recent quarters, but the underlying pace of growth appears to have slowed as a result of weaker global growth and an intensification of Brexit uncertainty. To date, the slowdown has largely centred on business investment, while household spending has been more resilient.”
There is wide speculation that the property market is holding its breath until after the 12 December election. David Westgate, Group Chief Executive at Andrews Property Group, said, “Increasingly, it feels like the market is starting to find a bit of a rhythm, and a strong majority for the Conservatives could add even more momentum.
“A lot of people are fed up with the noise of politics and are getting on with their lives. Exceptionally low mortgage rates and more affordable prices are making that decision a bit easier. Some sellers are still proving stubborn on price but overall there is a bit more realism than there was earlier in the year.
“The one thing that’s still thin on the ground, perhaps no surprise in the current climate, is the aspirational mover. A decisive win for Boris Johnson could see the market rebound sharply, but if we end up with more political deadlock the market could continue to idle along for another year.”
However, historically elections have little impact on house prices. Nationwide analysed house price movements in the months around previous elections, and threw in the 2016 EU referendum for good measure.
“Past general elections do not appear to have generated volatility in house prices or resulted in a significant change in house price trends,” Gardner said. “On the whole, prevailing trends have been maintained just before, during and after UK general elections. Broader economic trends appear to dominate any immediate election-related impacts.
“While activity slowed in the period immediately following the EU referendum, this was a continuation of a trend that was driven by the introduction of additional stamp duty on second homes earlier in that year.
“It appears that housing market trends have not traditionally been impacted around the time of general elections. Rightly or wrongly, for most home buyers, elections are not foremost in their minds while buying or selling their home.”
Indeed, the latest data from Zoopla shows that prices are firming up in London, following months of negative growth. Prices were up 1% year-on-year, the highest rate of growth for two years.
Today, house prices are registering month-on-month price falls in less than a quarter of London’s housing markets – well down on the 85% of markets registering price falls a year ago and the lowest coverage of price falls since May 2017.
The shift in London house price momentum can be explained by a decrease in the number of new properties for sale, which has restricted supply. Additionally, Zoopla data shows a notable increase in the number of sales agreed per agency branch; while this increase is off a low base, it indicates that there is renewed demand for housing in London after a sizable drop in sales volumes over the last three years. More realistic prices has also helped lift sales.
While London’s housing market has been through an extended slowdown, accompanied by lower sales, large regional cities – once the engines of house price growth – are starting to show signs of slower growth.
House price growth since the start of 2017 has exceeded 15% across Edinburgh, Leicester, Manchester and Birmingham, but the pace of growth is slowing. All the cities covered by the index are registering price growth of less than 5% per annum – a trend that has become established over the last quarter. This is the first-time growth across all cities has been below 5% since November 2012.
Richard Donnell, Research and Insight Director at Zoopla, said: “After a three-year repricing process accompanied by a sizable decline in housing sales, the London housing market is finally showing signs of life. The shift in momentum is clear, resulting from a lack of supply, increased sales and more realistic pricing, which bode well for higher sales activity in 2020, rather than a pick-up in house price growth.
“While the London housing market has been in the doldrums, market conditions in regional cities have been stronger over the last two years with demand supported by employment growth and attractive housing affordability. The rate of growth is slowing, and all cities are registering annual growth of less than 5%.
“The announcement of the General Election has brought forward the usual seasonal slowdown, but the last few weeks of the year pre-Christmas tend to be much quieter than after Boxing Day, when consumer interest in housing springs back to life.”
