Storm clouds gather as house price growth dips to five-year low

Agents appear to be getting more pessimistic over the housing market as the latest government figures show prices still growing - but at their lowest level for five years.

House price growth dropped to 3.0 per cent in the year to May 2018 – the lowest annual rate since August 2013 - according to the ONS house price index.

The reduction appears to have been driven by chiefly by the sluggish market in the south and south east of England, with London dropping 0.4 per cent year-on-year.

The Midlands provided the best news - prices in the East Midlands grew 6.3 per cent in the year to May, followed by the West Midlands up 5.0 per cent.

“This is the most comprehensive survey of UK house prices and confirms what we have seen on the ground. Property prices cannot be sustained indefinitely by low stock and mortgage rates. Lower demand is forcing vendors to be more realistic with fewer, more nervous buyers who are prepared to shrug off Brexit concerns” says Jeremy Leaf, the former residential chairman of RICS who runs his own north London agency.

“Looking forward, no major correction is anticipated but a price softening in some areas, especially London, where supply exceeds demand” he adds.

According to Guy Bradshaw, director of central London sales and lettings at UK Sotheby’s International Realty: “We were never expecting to see a particularly buoyant market this year, with political uncertainty and stamp duty continuing to dampen sales. The ‘Spring Bounce’ is undeniably modest in comparison to previous years and whilst this may be due to the poor weather we encountered late into the year this may very well be setting the scene for the summer market.”

Nick Leeming, chairman of Jackson-Stops, comments:“In May it was full steam ahead for house price growth in the East and West Midlands. Despite the rate of annual growth in the UK continuing to decline to the lowest rate we have seen since August 2013, it is positive to see confidence levels and economic activity remaining high in these locations.”

Meanwhile Richard Snook, senior economist at PwC, says: “The strong gains in London last month have been erased by a major downward revision. April was originally reported as £484,600 but is now £478,600. 

“These revisions, combined with May’s figure of £478,900 means that annual house price growth in London has now been negative since February 2018. In our regional forecasts we predict price falls in London in 2018 and 2019 of 1.7 per cent and 0.2 per cent respectively."