02 May 2019

UK house price growth remained weak in April

  • Annual house price growth remained subdued at 0.9% in April

  • Prices rose 0.4% month-on-month, after taking into account of seasonal factors

UK house price growth remained subdued in April, with prices just 0.9% higher than the same month last year.

Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, even though survey data suggests that sentiment has softened.

Measures of consumer confidence weakened around the turn of the year and surveyors report that new buyer enquiries have remained subdued.

While the number of properties coming onto the market has also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of supply and demand in favour of buyers in recent months. April marks the fifth month in a row in which annual house price growth has been below 1%.

First time buyer numbers recovering

While the ongoing economic uncertainties have clearly been weighing on consumer sentiment, this hasn’t prevented further steady gains in the number of first time buyers entering the housing market in recent quarters.

Indeed, the number of mortgages being taken out by first time buyers has continued to approach pre-financial crisis levels in recent months, as shown in the chart below.

Regional house prices relative to 2007 peak graph

First time buyer numbers have been supported by the strength of labour market conditions, with employment rising at a healthy rate, and earnings growth slowly gathering momentum.

While house prices remain high relative to average earnings, low mortgage rates have helped to support mortgage affordability. Indeed, raising a deposit appears to be the major barrier for prospective first time buyers, since the cost of servicing the typical mortgage remains in line with or below long-run averages as a share of take home pay in most regions of the UK (see chart below).

mortgage payments a % of take home pay

The exception is in London and parts of the south of England where affordability pressures are more acute, and the monthly cost of servicing a mortgage, as well as raising a deposit, poses a greater challenge.

Indeed, comparing the incomes of actual first time buyers in 2018 with average incomes in each region highlights how affordability pressures vary across the UK.

In 2018, first time buyer incomes were in line with or below average incomes in most regions. However, in the East, South East and London, first time buyers’ incomes were significantly higher than average incomes in those regions (60% higher in London), illustrating the extent to which many prospective buyers are priced out of the market in those areas.

FTB mean earnings vs mean earnings graph
monthly % change seasonally adjusted

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About the author

Robert Gardner

Robert Gardner is Nationwide’s Chief Economist, leading a team which provides economic analysis and advice, focused on developments in the UK economy, with particular emphasis on the housing market and house prices.

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