As we continue to monitor house prices in the UK, it is important to understand the impact of what Brexit will do to the housing crisis. The trend of rising house prices sounds like repetitive news, but this month has been reported to have shown a decrease for another month in a row. The Guardian informed us this weekend of the reasons why.
A fall in house prices this April has been purportedly a sign that a squeeze on family incomes in the UK are having an effect on the economy and a burden on the property market. According to new information from Nationwide, the average price of the home dropped by 0.4% over the month to £207,699, after a 0.3% last month. This has been the first time that prices fell in two consecutive months in nearly half a decade and drove down the yearly rate of house price growth to 2.6%, the weakest since June 2013. Robert Gardner, chief economist at Nationwide, mentioned that the slowdown could reflect the bigger picture of consumer finances, which has been facing an escalating strain due to the combination of rising inflation and weak wage growth. Gardner commented: ”While monthly figures can be volatile, the recent softening in price growth may be a further indication that households are starting to react to the emerging squeeze on real incomes or to affordability pressures in key parts of the country.”
As highlighted in the previous article, the volatility in the property market and its general outlook will be difficult to ascertain as we await the full implications of Brexit. Nationwide has also remarked that housing affordability was a significant problem for future home buyers, with a typical house price currently at 6.1 times higher than average earnings, which is markedly higher than the long run average of 4.3 times earnings. Nationwide anticipates house price growth to be halved than what it was the previous year, from 4.5% in 2016 to 2% this year. Falling prices have not just affected the housing sector, though, as there has been falls in retail sales, and many households have had to resort to going into their savings in order to maintain their spending. Currently, inflation is at 2.3%, but is set to rise to 3% as the failing pound eats away at the cost of living ever since the result of the referendum last June.
The Guardian also reported on the slowed down growth in consumer lending, with figures revealed by the British Bankers Association showing that lending slowed to 6.1% last month from 6.5% in February. The reason for this fall was due to growth in personal loans, credit card borrowing and overdrafts. Also affected were mortgage approvals, with approvals 2.8% lower in March than in February, at 41,061.
Once again, we see the erratic behaviour in the housing sector being affected by the uncertain conditions connected with Brexit. The property market remains volatile at best, and this renders property experts in difficulties when it comes to predicting what is next.