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UK house price growth slows to five-year low in June

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Staff Writer | June 27, 2018
House prices in the UK rose at their slowest annual rate in five years in June amid subdued economic activity and squeezed household budgets, according to the survey by Nationwide.
UK house
Britain   House prices increased 2%, down from 2.4% growth in May
House prices increased 2%, down from 2.4% growth in May but above expectations for a 1.7% jump. On the month, prices were up 0.5% in June, accelerating from 0.2% growth the month before and ahead of expectations of 0.3% growth.

London was the weakest performing region in the second quarter and the only region to see a decline, with prices down 1.9% on the year. Still, prices in the capital remain more than 50% higher than their 2007 peak, with prices in the UK overall just 15% higher.

Nationwide's chief economist, Robert Gardner, said: "Indeed, annual house price growth has been confined to a fairly narrow range of circa 2-3% over the past 12 months, suggesting little change in the balance between demand and supply in the market over that period.

"There are few signs of an imminent change. Surveyors continue to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent.

"Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the slowdown to a five-year low is "another milestone in the housing market's slowdown".

"On current trends, the year-over-year rate will slow further, given that month-to-month gains in the first half of 2018 have averaged just 0.1%.

"Note too that Rightmove's measure of online asking price rose by just 1.7% year-over-year in June, while the balance of surveyors expecting prices to rise over the next three months was its lowest since the referendum in May, according to RICS.

"Slowing growth in prices largely reflects the impact of recent increases in mortgage rates on affordability.

"Tight supply, a healthy labour market and a continued lengthening of mortgage terms - 30 year loans now are common - will help to prevent prices from falling outright.

"But it is inevitable that house prices will grow at a slower rate than households' incomes during a period of rising mortgage rates.

"We expect the MPC to provide the housing market with some relief by passing over the opportunity to raise Bank Rate in August, though it is a close call.

"But the MPC is committed to a tightening cycle and we see two rate hikes coming in 2019. As such, we expect the official measure of house prices to rise by just 1.5% over the course of 2018 and a mere 2.0% over 2019."