Although price growth continued to increase at a “brisk” annual rate of 9.2 per cent in May – taking the average value of a home to £213,472 – the quarterly rate eased slightly on the April figure, according to the Halifax.
On Monday, economics consultancy Capital Economics said house price inflation in the UK had hit its peak for the year following the rush to purchase property in March in a bid by second-home and buy-to-let landlords to beat a stamp duty rise that came into effect on such homes in April.
Martin Ellis, a housing economist at Halifax, said, “Low interest rates, increasing employment and rising real earnings continue to support housing demand. The strength of demand, combined with very low supply, is causing house prices to rise at a brisk pace.”
But he added, “Increasing affordability issues, caused by a sustained period of higher-than-earnings house price growth, should curb housing demand and result in some slowdown in house price growth as the year progresses.”
Howard Archer, chief UK and European economist for IHS Global Insight, commented, “The strong suspicion is that housing market activity will be pressurised in the immediate term by a combination of weakened interest from the buy-to-let and second home sectors as well as heightened concerns and uncertainties over the UK economic outlook, particularly in the run-up to June’s referendum on EU membership.”
“Nevertheless, we expect housing market activity to regain limited momentum in the latter months of 2016 on the assumption that a vote to stay in the EU reduces uncertainty and supports a pick-up in economic activity. High employment, decent purchasing power and the probability that interest rates will not rise for some considerable time to come (and highly unlikely in 2016) should underpin house buyer interest.”
Mark Posniak, managing director at Dragonfly Property Finance, added, “There may be mayhem in the market, in the form of recent stamp duty changes and the forthcoming referendum, but the May index once again underlines how the imbalance between supply and demand is holding prices up.”
Jonathan Hopper, managing director of Garrington Property Finders, said, ““The injection of a hefty dose of reality means the property market is now the reverse of what it was at its peak. Where once average prices were dragged up by runaway inflation among prime property, now the mid-market’s steady growth flies in the face of the price-cutting seen on Britain’s most expensive properties.
“At the prime end of the market, the reverse risks turning into a rout. A dip in demand from would-be buy-to-let landlords following the stamp duty hike had been expected, but the 45per cent slump in sales recorded in April shows just how acute the morning after effect was.
“Increasing numbers of vendors are now being forced to reassess their overly ambitious asking prices – shifting the power dynamic from a seller’s to a buyer’s market.”
But Rob Weaver, director of investments at property crowd-funding platform Property Partner, felt that this year’s house price volatility, prompted by the stamp duty, was making 2016 a difficult year to predict.
“Activity in the housing market has seen a dramatic slowdown,” he said. “This month’s big vote has left many sellers holding on and many buyers holding back to see whether we’re in or out. It’s become a high June Brexit stand-off.
“In the short-term, a vote to remain in Europe should mean the same old, same old – a relentless rise in house prices. But if we decide to leave, we could see a corresponding correction.
“Post-June, particularly in London and the South East, the market will become relatively more predictable and activity should pick up.
“A cocktail of historically low interest rates, strong employment and rises in real earnings can only mean one thing. And until the perennial problem of weak supply is adequately addressed, prices will keep marching upwards.”
by David Sapsted
SOURCE: Relocate Magazine
