UK house prices fell unexpectedly in June, dragging the annual rate of growth to the lowest level in four years in the latest sign that consumers are shying away from major spending commitments.
The average cost of a home fell by 1% over the month to £218,390 according to Halifax, one of the UK’s biggest mortgage lenders. It was the first drop reported by Halifax in five months and surprised economists who had forecast a 0.2% increase.
Annual house price inflation fell from 3.3% in May to 2.6% in June, the weakest since May 2013.
Martin Ellis, a housing economist at Halifax, said house prices had flattened as consumers took a more cautious view.
“Although employment levels continue to rise, household finances face increasing pressure as consumer prices grow faster than wages,” he said. “This, combined with the new stamp duty on buy to let and second homes in 2016, appears to have weakened housing demand in recent months.”
However, the rival lender Nationwide last week said its data suggested UK house prices rose in June, by 1.1%, but it reported a sharp slowdown in London.
Economists believe that a combination of low mortgage rates and a shortage of properties coming on to the market will prop up the housing market in the coming months, preventing a drop in prices in 2017 overall. Estate agents reported a fall in new instructions for the 15th consecutive month in May, according to the latest data from the Royal Institution of Chartered Surveyors.
Hansen Lu, a property economist at Capital Economics, said house prices were likely to rise by about 2% this year.
“It seems unlikely that the recent softness in prices is the start of a major decline. Yet it is also hard to see the market gaining much momentum,” said Lu. “After all, while house prices have come down a little, they are still close to a record high. And we expect that will continue to dampen buyer demand.”
