UK residential market view
House price growth across the UK stood at 4.9% annually in January, according to the latest figures from the Land Registry, down from 5.2% in December and from 6.2% in January 2017.
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A slowdown in terms of pricing is unlikely to come as a surprise amid mounting affordability pressures in certain parts of the country and a renewed squeeze on household incomes. Concerns over future interest rate rises, and the wider political and economic backdrop have also weighed on buyer confidence in some parts of the market, .
But while this may be the case, annual price growth remains positive in around 95% of Local Authorities in the UK. This might suggest a healthier market than the headlines allude to.
However, it is worth noting that a growing proportion of Local Authorities are now reporting growth of less than 5% per annum, a noticeable change from late 2014 when around a third of Local Authorities were reporting double digit price rises.
A current shortage of homes for sale is likely to be underpinning values in a number of areas, something highlighted by recent data from the Royal Institute of Chartered Surveyors (RICS) which showed that the number of homes estate agents have for sale fell to a record low last month.
Average price growth also only provides half the story. We often talk about the localised nature of markets and even within Local Authorities there are significant variations. Performance is dependent not just on location, but also specification, amenity and, especially at the higher end of the market, the extent to which stamp duty rises have been priced in. Indeed, conversations with agents suggest that where deals are taking place, it reflects a more pragmatic approach to pricing by vendors.
You can read our latest analysis of prime markets in London and the Country in the Knight Frank Research Library.
Monthly changes in property values also offer a different perspective. On this measure, nearly half (48%) of Local Authorities reported falling prices in January compared with the previous month, the highest level since March 2015, and more in line with the wider housing market narrative.
Outlook
Our view remains that house price growth will continue to slow in many parts of the country. We expect price rises will remain muted overall this year and next.
The market is localised, however, and we see slightly stronger growth in the Midlands, East of England and the North West, a continuation of the trend that emerged in 2017.
Once the Brexit deal is completed, we forecast rising momentum across the market, with price growth reflecting this in many locations.
Our full UK housing market forecasts - which use the Nationwide House Price Index as a base - can be viewed here.
