Average house prices dropped by 0.6% in January, according to Halifax’s latest monthly House Price Index, with strained household finances contributing to the fall.
The bank said that the annual rate of price growth in the three months to January slowed to 2.2%, down from 2.7% in December.
Although employment figures are improving, consumer prices continue to grow faster than wages, placing pressure on household budgets. It is also too early to see the impact of the stamp duty exemption for first-time buyers which was introduced in the November budget, Halifax said.
Despite the fall in house prices in January, Halifax remains relatively upbeat about future prospects, with low mortgage rates combined with a lack of properties for sale expected to underpin prices in coming months.
Halifax’s latest House Price Index was unveiled before February’s base rate decision, when the Bank of England warned that rate rises could happen sooner and be greater than previously forecast in a bid to slow inflation.
Nationwide reports higher prices
Nationwide’s January House Price Index painted a different picture to Halifax, with the building society reporting that house prices rose by 0.6% in January.
The building society said that the rate of annual house price growth increased to 3.2% at the start of 2018, up from 2.6% at the end of 2017, but admitted this was “a little surprising” given pressure on household incomes.
Even though Nationwide said house prices rose last month, it reported subdued activity both on the demand and supply side. Like Halifax, Nationwide believes the shortage of available properties is the key factor which will support house prices going forward, and unemployment and mortgage rates are expected to remain low by historic standards.
However, the building society said that how the housing market performs in the year ahead will be largely determined by developments in the wider economy, including the impact of Brexit.
Although home ownership rates remain relatively stable, according to the latest English Housing Survey from the Ministry of Housing, Communities and Local Government, Nationwide pointed to the “marked decline” in the rate of ownership amongst those aged between 25 and 34. Only 37% of people in this age group own their own homes, compared to 62.6% across all age groups, suggesting growing affordability pressures for first-time buyers.
House price growth slows in January