UK House Prices Fall in April, Could This Trend Continue?

UK house price growth slowed in April as a combination of lower buyer interest from Buy-to-Let (BTL) investors and uncertainty ahead of the in/out EU Referendum next month weighed on confidence. When consumer confidence weakens, people tend to feel less wealthy and less positive

According to the latest monthly house price index conducted by lender Halifax, based on its own mortgage lending activity, the average house price in the UK was £212,321 in April, 0.8% lower than it was in March. It also reported a slowdown in the pace of annual growth from 10.1% in March to 9.2% in April – the lowest year-on-year increase since November.

The Halifax said that while a “severe imbalance” between the supply and demand for property remains and should continue to support house prices going forward, there was also downward pressure on prices. This stems from sentiment on house prices which, according to the lender’s housing market confidence tracker, fell to the lowest level in over a year.

“Weakening sentiment regarding house price prospects and a dip in consumer confidence, however, suggest that annual house price growth may ease,” said Martin Elis, Halifax housing economist.

While the Halifax index and commentary focus on the figures and facts, other economists commented that the decline in house price clearly represented specific developments going on elsewhere.

Samuel Tombs, economist at Pantheon Macroeconomics, said that “the surge in March likely partly reflected some buy-to-let and second home buyers paying a premium to complete transactions before the increase in stamp duty - a property transfer tax - on such purchases on April 1.

And, Rob Weaver, director of investments at property crowdfunding platform Property Partner, believes there will be a dampening of prices in the run up to the referendum. “Predictions can be tricky particularly as concerns over a potential Brexit may affect housing activity. Uncertainty is the operative word and we may see a dampening in prices in the short term,’ he pointed out.

As you can see there are some interesting elements at play in the housing market at the moment. Prices and activity surged in the past few months, and now, despite there still being not enough property to satiate demand for it, prices have slowed and confidence and demand are waning.

It remains to be seen how much of an impact the result of the referendum vote will have on the housing market. It will also be interesting to see just how long BTL investors stay away and stick with their existing portfolios.

The Council of Mortgage Lenders agrees that the second half of 2016 could be a very different one for the housing market, but right now, nothing is certain.

“What will happen over the next few months is difficult to gauge, but we can take an educated guess, based on the data we already have, said CML economist Mohammad Jamei. “We estimate that there will be an average of 10,000 fewer mortgage transactions in April, May and June.