House prices fell by 0.4% in April, according to Nationwide Building Society’s latest House Price Index, the second consecutive month that prices have dropped.
Annual house price growth dipped to 2.6%, the building society said, with the average house price in the UK now at £207,699. Annual growth is now at its weakest pace for nearly four years.
Falling prices could indicate that households are feeling the pinch due to rising inflation and slow wage growth, according to Nationwide, but it is too soon to know whether the slowdown is just a “blip” or a longer-term trend.
The building society pointed to retail sales figures showing that spending has slowed considerably in recent months, which could be another indicator that household budgets are coming under pressure.
However, it said that the slowdown was “surprising” given relatively high consumer confidence, low mortgage rates, and the unemployment rate being close to a 40-year low.
One of the main issues homebuyers face is that house price growth has been outstripping earnings growth for years, making buying a property unaffordable for many. At nearly £208,000, the typical house price is currently 6.1 times average earnings. This is close to the all-time high of 6.4 times earnings recorded a decade ago.
The Council for Mortgage Lenders claims that the UK housing market is currently in “neutral gear” with first-time buyers and those remortgaging the key drivers of mortgage activity, shifting away from home-movers and buy-to-let landlords.
Despite slowing house prices, Nationwide’s chief economist Robert Gardner says that “the subdued level of building activity and the shortage of properties on the market are likely to provide support for prices. As a result, we continue to believe that a small increase in house prices of around 2% is likely over the course of 2017 as a whole.”
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House Price growth drops for second month