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House prices up almost £5,000 in the year since the Brexit vote, but property market slows as buyers struggle

House prices are up almost £5,000 in the year since the Brexit vote, figures revealed today.

A combination of record low mortgage rates and a lack of homes for sale has bolstered the property market, but the pace of house price rises has slowed considerably, according to the Halifax house price index.

House prices rose by another 0.4 per cent in July, to take the average home’s cost up a further £789 to £219,266 – 2.1 per cent higher than a year ago.

House prices were down over the three months to July, however, Halifax said, dipping 0.2 per cent from the £220,515 reached in May.

The July house price figures mark an entire calendar year’s data since the EU referendum vote on 23 June 2016.

Despite forecasts of house price falls in the event of a Leave vote, the property market has remained above water.

However, while house prices have continued to climb the rate at which they are rising has dropped substantially – and they have fallen since the start of the year.

The average home is down £2,924 on the £222,190 peak on the Halifax index at the end of December last year.

House price inflation has fallen from 10 per cent in March 2016.

A slew of data has emerged showing a slowdown in the property market, with the Bank of England last week revealing a 9 per cent annual decline in mortgages for home purchases and the Royal Institution of Chartered Surveyors flagging falling house prices in London.

Home buyers are being aided by low mortgage rates, but are struggling with low wage growth and an inflation squeeze on their finances, said Russell Galley, managing director, Halifax Community Bank.

House prices up 10% in ten years since crunch

House prices have risen just 10 per cent in the decade since the credit crunch began, Halifax highlighted in its report today.

When the property market peaked before the credit crunch and financial crisis in August 2007,  the average home stood at £199,600.

The average house price fell to its lowest point of £154,663 in April 2009 and is 42 per cent above that at £219,266 today – a rise of £64,603.

He said: ‘This squeeze on spending power, together with the impact on property transactions of the stamp duty changes in 2016 now being realised, along with affordability concerns, appear to have contributed to weaker housing demand.

‘However, a continued low mortgage rate environment, combined with an ongoing shortage of properties for sale, should help continue to support house prices over the coming months.’

Last week, rival mortgage lender Nationwide forecast that house prices will rise by just 2 per cent this year to fall behind inflation and deliver a buyers’ market.

The building society’s economist Robert Gardner said: ‘While employment growth has remained relatively robust, household budgets are coming under pressure as wage growth is failing to keep up with the rising cost of living.’

‘This suggests that housing market activity is likely to remain subdued, with the balance in the market shifting a little further towards buyers in the quarters ahead.’

With house prices high and rises outpacing wages, the key to getting a home for many buyers has been access to record low mortgage rates.

Those with the largest deposits can currently fix their mortgage for two years at less than 1 per cent, or five years at between 1.5 per cent and 2 per cent.

Rates for borrowers with smaller deposits are higher, but even those with just 10 per cent to put down against a property can get a two-year fixed rate mortgage at less than 2 per cent, or a five-year fix at under 2.5 per cent.

However, there are concerns that mortgage rates could shift upwards even without the Bank of England raising the base rate.

The Bank revealed that it would end cheap funding for banks and building societies brought in as an emergency measure after the Brexit vote, alongside its Inflation Report and rate decision last week.

The Term Funding Scheme, which pumps cheap money through to banks to lend on to borrowers, will end in February.

About £78billion has already been lent and the figure is poised to soar to £115billion by the time it is terminated.

This could put a further damper on house prices, although many aspiring homeowners or those hoping to move up the ladder may see this as a good thing.

‘Given that prices are now reaching all-time highs, a subdued level of house price growth for the rest of 2017 may not be such a bad thing’, said Brian Murphy, of Mortgage Advice Bureau.

‘We don’t need prices to run out of control to the extent that it triggers a market correction, and prices do need to remain at a level whereby first-time buyers, who underpin the rest of the market, are able to afford to purchase in order to ensure that the rest of the property market ecosystem continues to function.’

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