House prices reached a record average high of £213,000 this month, according to new figures from Nationwide Building Society.
Property values in Britain climbed 0.2 per cent month-on-month during April, reversing a 0.2 per cent decline in March, its latest house price index has revealed.
The annual pace of house price growth also accelerated to 2.6 per cent, from 2.1 per cent when they slumped to a seven-month low in March.
New high: UK house prices hit a record average high of £213k this month, according to new figures from Nationwide
In April 2017, the average house price was £207,699.
However, Britain’s biggest building society warned that house price gains are expected to slow to one per cent this year, reflecting weak economic growth and possible higher interest rates.
Robert Gardner, Nationwide’s chief economist, said: ‘Looking ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates.
‘Subdued economic activity and the ongoing squeeze on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year.
‘We continue to expect house prices to rise by around one per cent over the course of 2018.’
Buying: There has been a recovery in first-time buyer transactions
Gardner said the share of cash transactions in the housing market has fallen slightly over the past 18 months.
However, he added that cash buyers still account for around a third of sales.
Gardner suggested the decrease was partly due to the introduction of an additional stamp duty levy for people buying second homes and rental properties, a large proportion of which tend to change hands using cash.
How expensive are homes?
The Nationwide figures follow a report from the Office for National Statistics yesterday, which revealed house prices are more expensive compared to wages than at any time on record.
Buying the average home in England and Wales would now cost a full-time worker 7.8 times their salary.
House prices rising faster than wages meant that ‘housing affordability significantly worsened’ in England last year, the Office for National Statistics said.
The figures emerged in a report that laid bare the effect of two decades of house price inflation on workers’ ability to buy a home. In 1997, the average home in England and Wales cost 3.55 times earnings – making it less than half as expensive as it is now.
He added: ‘In recent years, we have seen a recovery in first-time buyer transactions, which are now broadly in line with pre-crisis levels.
‘The easing in credit availability, including schemes such as Help to Buy, have helped boost activity. Meanwhile, home-mover activity has remained relatively subdued, in part due to the lack of stock on the market.
‘Buy-to-let purchases have fallen as a share of total transactions since 2016.’
Slower growth: Annual house price changes have slowed compared to before the EU referendum
House prices have been rising much more slowly than before the European Union referendum result, which hit consumer confidence.
Howard Archer, chief economic adviser at EY Item Club, said: ‘It is very possible that housing market activity – and possibly prices – were adversely impacted in March by the severe weather that particularly occurred during the month.
‘Even so, the current softness of the housing market runs deeper than that.’
Housing shortage: Prime Minister Theresa May wants construction of new homes to increase to 300,000 a year to tackle a shortage of housing
He added: ‘We continue to expect price gains over the year will be limited to a modest two per cent.
‘The fundamentals for house-buyers are likely to remain challenging.
‘Consumers have faced an extended serious squeeze on purchasing power, which is only gradually easing.
Hovering: The house price to earnings ratio continues to run far higher than the average
‘Additionally, housing market activity remains hampered by relatively fragile consumer confidence and limited willingness to engage in major transactions.
‘House-buyers will also likely be concerned about further interest rate hikes over the coming months.’
Mike Scott, chief property analyst at Yopa, said: ‘Nationwide are forecasting a rise of one per cent for 2018 as a whole, which if anything is looking a little pessimistic.
Bigger gap: Number of homes owned outright versus owned with a mortgage
‘However, there are a few clouds on the horizon.
‘They report falls in the numbers of both buyer enquiries and houses coming up for sale, suggesting a slowdown in market activity, although this may not have much effect on prices if the drops in demand and supply run in tandem.’
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: ‘The small increase in house price growth is probably more to do with a lack of supply rather than a burst of springtime activity.
‘Nevertheless, a rise is more welcome than a fall and in line with other recent statistics shows that the market is continuing to follow a slow upward path, albeit without any fireworks.
‘Looking forward, we don’t expect a huge change but we are seeing an increase in valuations and listings which is likely to show itself in a little bit more activity over the coming months.’
Brian Murphy, head of lending for Mortgage Advice Bureau, said: ‘While the growth is, at best, incremental, it does at least point to a market which remained robust in the first four months of this year.
But sellers aren’t getting their full asking price
Despite the increase in average house prices, only one in ten properties sold for the original asking price in March – the lowest level since records began in 2013 – according to NAEA Propertymark.
Demand for housing was also marginally down with the number of house hunters on estate agents’ books at 308 per branch last month from 309 in February.
Year-on-year, however, the picture is much worse with housing demand declining by 22 per cent, as agents registered 397 house-hunters per branch in March versus 417 a year previous.
The number of properties available per branch increased from 35 in February to 40 in March – the highest since October last year.
Mark Hayward, chief executive, NAEA Propertymark, said: ‘A record number of properties sold for less than asking price in March, indicating that buyers have shifted into the power seat.
‘This is music to house-hunters’ ears – especially first-time buyers.
‘Although sales to the group have fallen, the fact that the market is moving in the favour of buyers may trigger an upward swing in the number of sales agreed as they’re in a position to negotiate lower prices.
‘However, this is a short-term triumph for buyers. Although demand has cooled off over the last few months and created these market conditions, it’s likely to increase again as those holding off on making purchases move to take advantage of these lower prices.’
‘One might suggest that the subdued average increase in values could be a reflection of current market dynamics.
‘London and the South East are seeing a higher level of available properties than previously coupled with reduced demand putting a dampener on pricing, contrasted with many areas in the rest of the UK still seeing a drought in properties on the market, leading to lack of buyer choice.’
The Bank of England has said it expects to continue raising interest rates after making the first increase in over a decade in November 2017.
Many investors believe there’s a likely chance of another hike next month.
However, a shortage of homes for sale is expected to continue to shore up the housing market.
Prime Minister Theresa May wants construction of new homes to increase to 300,000 a year to tackle a shortage of housing.