UK house prices fell unexpectedly in February for the first time in six months, as the squeeze on household incomes and weaker economic backdrop weighed on the property market, according to the mortgage lender Nationwide.
The average price of a home fell by 0.3% last month to £210,402, following a 0.8% increase in January. City economists had expected a 0.2% increase.
The February decline drove down the annual rate of UK house price growth to 2.2%, the weakest in six months and less than half the 4.5% in the same month last year.
“Month-to-month changes can be volatile, but the slowdown is consistent with signs of softening in the household sector in recent months,” said Robert Gardner, Nationwide’s chief economist.
He said the outlook for house prices in the months ahead was difficult to predict because of the uncertainty over Brexit negotiations.
“How the housing market performs in the year ahead will be determined in large part by developments in the wider economy and the path of interest rates. Brexit developments will remain a key factor, though these remain hard to foresee,” he said.
“Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.”
Nationwide is forecasting a slowdown in house price growth to about 1% in 2018, down from 2.6% in 2017, the slowest rate of growth in five years. Gardner said low unemployment and a shortage of properties on the market were factors preventing a fall in average house prices.
Separate data from the Bank of England painted a stronger picture of the UK housing market, with the sharpest rise in mortgage approvals in nearly three years at the beginning of 2018.
The number of mortgages approved for house purchase rose to 67,478 in January from a one-year low of 61,692 in December. It was the highest number since July 2017, the biggest monthly rise since April 2015 and easily beat forecasts of 62,000 in a Reuters poll of economists.
Howard Archer, chief economic adviser to the forecasting group, the EY Item Club, cautioned that housing market activity tended to be particularly volatile around Christmas and New Year.
“The stronger January Bank of England mortgage approvals data does little to dilute our belief that 2018 will be a difficult year for the housing market,” Archer said. “Price gains over the year are likely to be limited to a modest 2%.”
