UK house prices have grown at the slowest rate in five years in June, with London remaining the weakest spot as strained household finances and economic uncertainty kept buyers away.
Annual price growth slowed to 2% this month from 2.4% in May according to Nationwide’s monthly report. It was the lowest rate of growth since June 2013, when UK prices rose by 1.9%.
The average price of a UK home is now £215,444 according to the mortgage lender, after edging up by 0.5% on a monthly basis in June.
Robert Gardner, Nationwide’s chief economist, said Britain’s housing market was likely to remain subdued in the coming months.
“There are few signs of an imminent change. Surveyors continue to report subdued levels of new buyer inquiries, while the supply of properties on the market remains more of a trickle than a torrent.
“Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low.”
London was the only UK region where annual house prices fell in the second quarter, as the capital continues to be the weakest spot in Britain’s housing market.
Although it is still easily the most expensive place to buy property, the average price of a home in London fell by 1.9% in the second quarter to £468,845.
The London housing market has been harder hit than other regions for a number of reasons, including lack of affordability amid weak wage growth and tougher mortgage criteria.
It has also been hit by the higher rate of stamp duty on second homes introduced in April 2016, which applies to more property sales in the capital than elsewhere.
The east Midlands was the region with the strongest annual house price growth in the second quarter according to Nationwide, with average prices up 4.4% to £181,549. Prices in Wales were up 4% at £153,964.
Gardner said longer-term prospects for the housing market would depend on economic conditions and on the level of interest rates.
This month, the Bank of England held rates at 0.5% but signalled that a rise in August could be on the cards, which would push up borrowing costs for some homeowners.
Nationwide predicts house prices will rise by about 1% in 2018, down from 2.6% in 2017.
Jonathan Samuels, the chief executive of the property lender Octane Capital, said uncertainty over Brexit was weighing on the wider market. “With Brexit on the horizon, households feeling the pinch and interest rate uncertainty lingering, a lot of prospective buyers are sitting tight.
“Nationally, we’re witnessing the revenge of the regions, with the east and West Midlands in especially barnstorming form. Wales also has a significant spring in its step. London is in a league of its own once again, but sadly, for homeowners in the capital, it’s the bottom league.”
