Nationwide’s Chief Economist analyses the Society’s latest house price data, looks at the stamp duty changes and the income that stamp duty is generating.
The annual pace of house price growth moderated to 2.1% in August, from 2.9% in July. The slowdown in house price growth to the 2-3% range in recent months from the 4-5% prevailing in 2016 is consistent with signs of cooling in the housing market and the wider economy.
The economy grew by c.0.3% per quarter in the first half of 2017, around half the pace recorded in 2016. The number of mortgages approved for house purchase moderated to a nine-month low of c.65,000 in June and surveyors have reported softening in the number of new buyer enquiries.
Nevertheless, in some respects the slowdown in the housing market is surprising, given the ongoing strength 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% – the lowest rate for over forty years. In addition, mortgage rates have remained close to all-time lows.
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.