Annual house price growth SLOWS in June as experts warn of 'stagnation spiral'

THE annual rate of house price growth has slowed to 2.1% in June, from 3.5% in May, with experts warning the figures "could be the canary in the coal mine" of a "stagnation spiral".

Northern Ireland remained the top performing area, with annual house price growth of 9.7% last month, while East Anglia was the weakest performing region, with a 1.1% year-on-year rise, according to new data published this morning by the Nationwide.

Scotland recorded a 4.5% annual rise, while Wales saw a 2.6% increase.

Across England overall, prices were up 2.5% year-on-year, a slight softening from the 3.3% annual rise seen last quarter.

The north-south divide in house price performance narrowed during the quarter. Average prices in Northern England (comprising North, North West, Yorkshire & The Humber, East Midlands and West Midlands) were up 3.1% year on year, while those in Southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) were up 2.2%.

The North was the top performing region in England, with prices up 5.5%. 

Data by property type shows that terraced houses have seen the biggest percentage rise in prices over the last 12 months, with average prices up 3.6% year on year.

Flats saw a further slowing in annual price growth to 0.3%, from 2.3% last quarter. Semi-detached properties recorded a 3.3% annual increase, while detached properties saw a 3.2% year-on-year rise.

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said “UK house price growth slowed to 2.1% in June, from 3.5% in May. Prices declined by 0.8% month-on-month, after taking account of seasonal effects.  The softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April. 

"Nevertheless, we still expect activity to pick up as the summer progresses, despite ongoing economic uncertainties in the global economy, since underlying conditions for potential homebuyers in the UK remain supportive.

“The unemployment rate remains low, earnings are rising at a healthy pace in real terms (i.e. after accounting for inflation), household balance sheets are strong and borrowing costs are likely to moderate a little if Bank Rate is lowered further in the coming quarters as we and most other analysts expect."

Newspage spoke to experts who reacted to the figures.

Rob Peters, Principal at Simple Fast Mortgage, fears "this slowdown could be the canary in the coal mine".

He added: "Rising rates, stubborn inflation, and economic uncertainty are squeezing buyers dry. If growth keeps falling at this pace, sellers will be forced to slash prices just to get deals through which risks dragging the entire market into a stagnation spiral."

Babek Ismayil, Founder at OneDome, said the slowdown was due to the stamp duty deadline.

He continued: "This sharp slowing in the annual rate of house price growth likely reflects the lull in activity and demand following the stamp duty deadline. It’s encouraging that mortgage approvals rose in May, which suggests the market is starting to bounce back. However, affordability remains an issue for many prospective homeowners. Lenders are being innovative in trying to crack the affordability conundrum but it’s still a big hurdle for first-time buyers.

"A cut at the next Bank of England interest rate meeting in August would potentially ignite the market in the late summer and into the autumn but that is not guaranteed given stubborn inflation. The uncertainty around the pace and timing of further cuts is keeping both buyers and lenders cautious. A key issue is that buyers aren’t just battling financial pressures but are having to navigate a homebuying process that’s slow, fragmented, and frighteningly Dickensian."

Ranald Mitchell, Director at Charwin Mortgages, added: "Forget the postcode lottery, affordability is calling the shots. Buyers are chasing value, not vanity, and it’s the so-called overlooked regions that are stealing the spotlight. As mortgage rates hold firm and budgets are stretched, people are prioritising where they can buy, not just where they’d like to. That shift is reshaping demand across the UK in real time."

Rohit Kohli, Director at The Mortgage Stop, worries that the rising prices in the UK are making it difficult for people to get on the housing ladder.

He continued: "Yes, the pace of house price growth is slowing, but let’s be clear - prices are still rising. That’s cold comfort for first-time buyers who continue to face affordability barriers. Until we see meaningful progress on the government’s pledge to build 1.5 million new homes, house prices will keep moving upwards - fast or slow, they’re still going in one direction."

Chris Barry, Director at Thomas Legal, said the slowdown can be seen as a positive thing.

He added: "House price growth is now finding its feet at a much more sensible and sustainable level. Wages need to exceed house price growth in order to bring the dream of owning a home available to more people. June however was a much busier month for new transactions meaning house price data in a few months time will likely start to tick up again."

While Riz Malik, Director at R3 Wealth, said: "I have a number of clients looking to buy but stamp duty remains an issue especially at the upper end of the market. To have to pay 5 or 6 figure sums to simply move property is ridiculous. Getting chains to line up still remains an issue with less clients choosing the let to buy route in case the government does a U turn and stop the ability to reclaim additional stamp duty within 3 years and who can blame them."