UK house prices fell unexpectedly last month as inflation continued to squeeze household budgets, dragging annual house price growth down to one of its weakest rates in years, figures from major mortgage lender Halifax showed on Wednesday.
Average house prices fell 0.6 per cent in January after a 0.8 per cent decline in December, Halifax said, well below a consensus forecast of a 0.2 per cent rise in a Reuters poll of economists and the first time prices have fallen for two months in a row since just after June 2016’s Brexit referendum.
British annual house price growth has slowed since the vote to leave the European Union, although the impact has been concentrated in London and neighbouring areas, with most other parts of the country relatively unaffected.
House prices in the three months to January were 2.2 per cent higher than the same time a year earlier, down from a 2.7 per cent year-on-year rise in December. The latest figures are the weakest increase since July, when prices rose at the slowest pace since April 2013.
Howard Archer, an economist at consultants EY Item Club, predicted house prices would rise by two per cent this year, as high inflation and Brexit uncertainty kept a lid on prices.
“Housing market activity is expected to remain lacklustre as the marked squeeze on consumer purchasing power only gradually eases. Confidence is fragile and appreciable caution persists over engaging in major transactions,” he said.
British consumer price inflation hit its highest rate in more than five years in November, and the Bank of England (BoE) raised borrowing costs for the first time in more than a decade.
November also saw Chancellor Philip Hammond scrap a tax on house purchases for almost all first-time buyers. Halifax said it was too early to see any impact from the change.
Mr Archer said a shortage of housing made outright year-on-year price falls unlikely.
The Halifax data contrasts with figures published last week by rival lender Nationwide, which showed a surprise pick-up in growth to 3.2 per cent in January – the biggest rise since March 2017.
Nonetheless, the figures would make the BoE’s Monetary Policy Committee (MPC) reluctant to signal a rapid pace of further interest rate rises when the Bank publishes its next rate decision on Thursday, Samuel Tombs of Pantheon Macroeconomics said.
“The MPC can’t ignore the evidence of a housing market slowdown now in front of them, so we doubt that they will signal to markets tomorrow that interest rates could rise as soon as May,” he said.