House price growth has been stifled by uncertainty and a dwindling supply; however, the price of new builds looks set to fare better than existing stock.
In the year to end May 2017 new build house prices rose on average by 5.5% across the UK; although this is marginally down on last year’s figure of 5.6%; however, if Greater London is taken out of the equation, the price of new builds showed positive growth. A crude average of the remaining regions shows an average house price growth of 4.3%, compared to a figure of 4.0% last year.
This data from the LSL New Build Index suggests that new builds are bucking a worrying trend. Overall, house prices showed a third consecutive monthly decline for the first time since 2009. Annual house price growth dipped to 2.1%, providing further evidence that the housing market is losing momentum.
“As always, new build offers a clear alternative to second hand property, which come with an inherent uncertainty about potential future maintenance expenditure. Leading housebuilders are continuing to report strong forward order books and this confidence is reflected in the volume of starts in the first quarter which, according to Glenfigan, are well ahead of the same period last year. Similarly the NHBC report a 10% increase in private sector registrations,” NSL Land & New Homes said.
Meanwhile, house prices overall have spluttered in the face of a slowing economy. “It is still early days, but this provides further evidence that the housing market is losing momentum,” Robert Gardner, Nationwide’s Chief Economist. “Moreover, this may be indicative of a wider slowdown in the household sector, though data continues to send mixed signals in this regard.”
The Bank of England has warned of a credit squeeze as inflation is now exceeding wage settlements. In their latest report they also indicated that an interest rate rise may come sooner than expected. But against this there is positive employment data,
albeit that uncertainty over the consequences of Brexit and the General Election will continue to influence consumer sentiment, LSL Land & New Homes said.
Although it is generally thought that the general election has little influence over house prices, a strong stimulus to housebuilding is a common theme to the plans for all major political parties. So although much is uncertain, the general prospects for the new build sector remain strong as the overall market recovery continues and the need for more new housing remains clear.