UK eased to its slowest in three months in August, underscoring the impact of a and an inflation jump on consumer appetite for big-ticket purchases.
Nationwide’s monthly house price index showed on Tuesday that house prices rose 2.1 per cent year-on-year in the month, down from a 2.9 per cent rise in July and matching May’s four-year low.
The average forecast in a Reuters poll of economists had been for annual growth of 2.5 per cent.
“The slowdown in house price growth to the 2-3 per cent range in recent months from the 4-5 per cent prevailing in 2016 is consistent with signs of cooling in the housing market and the wider economy,” said Robert Gardner, Nationwide’s chief economist.
House prices slipped 0.1 per cent in August compared with last month, after rising 0.2 per cent in July.
Data last week confirmed that the UK economy expanded by 0.3 per cent in the three months to the end of June, or half the rate of the eurozone’s.
The economy had initially displayed resilience in the immediate aftermath of last June’s Brexit vote, with an expansion of 0.5 per cent in the third quarter of the year and 0.7 per cent in the final quarter.
But more recently that jump in inflation, stemming from a dramatic sell-off in the pound against the euro, the US dollar and other currencies, has dampened consumer spending and pushed the UK’s growth rate to the of the G7 club of large and developed economies.
Official inflation was in July, up from just 0.6 per cent a year earlier.
Mr Gardner said that the number of mortgages approved for house purchase moderated to a nine-month low of 65,000 in June and surveyors have reported softening in the number of new buyer enquiries.
He said that despite the jump in inflation and falling pound, however, the slowdown in the housing market is surprising “in some respects”, especially given the resilience of the labour market.
“The economy created a healthy 125,000 jobs in the three months to June and the unemployment rate fell to 4.4 per cent – the lowest rate for over forty years,” he said.
“It may be that mounting pressure on household finances is exerting a drag. Wages have been failing to keep up with the cost of living in recent months and consumer sentiment has weakened. While measures of housing affordability are not particularly stretched at a UK level, pressures are evident in some regions – especially London and the South of England,” he added.
Going forward, Mr Gardner said that housing market developments would depend on wider economic performance.
Tuesday’s data also showed that the stock of homes on estate agents’ books remains close to 30-year lows. The number of new homes coming onto the market is also subdued. Mr Gardner said that, as a result of that, he continues to expect prices to rise by around 2 per cent over 2017 as a whole.