House prices edged ahead by just 0.2% in January, leaving the typical UK home costing £205,240, says Nationwide.

What’s the latest?

The property market got off to a slow start in 2017 with house prices edging ahead by just 0.2% in January.

The increase, which followed a 0.8% rise in December, left the typical UK home costing £205,240, according to Nationwide Building Society.

The annual rate at which prices are climbing also eased slightly, dropping to 4.3%, compared with 4.5% in the year to the end of December. It was the weakest since November 2015. 

Nationwide said the outlook for the housing market remains ‘clouded’ reflecting broader economic uncertainty.

Why is this happening?

Annual house price growth has varied between around 4.5% and 5.5% for the past two years.

On the one hand, increasingly stretched affordability is acting as a brake on house price growth.

But this factor is somewhat offset by record low mortgage rates, which have kept down the proportion of income people need to spend on monthly mortgage payments, despite higher prices.

At the same time, the shortage of homes for sale has helped to support prices, as buyers are forced to compete against each other for properties.

Home for sale in Malmesbury.

Above: three-bedroom house for sale in Sherston, Malmesbury. 

Who does it affect?

The fact that the market has entered a period of slower price growth is good news for first-time buyers and those looking to trade up the property ladder as it takes off some of the pressure to act quickly for fear of being priced out of the market.

But the lack of homes for sale is bad news for those looking to buy as it restricts their choice.

The Royal Institution of Chartered Surveyors (RICS) also recently warned that the record low level of stock on estate agents’ books was beginning to distort the market.

Sounds interesting? What’s the background?

Nationwide’s chief economist Robert Gardner said there were grounds for optimism. The UK’s economy has been far stronger than expected in the wake of the Brexit vote, while the unemployment rate has remained stable at an 11-year low in the three months to the end of November.

But he warned that the outlook for the housing market was uncertain.

He explained: “There are tentative signs that conditions may be about to soften.

“Employment growth has moderated, and while wage growth has edged up in recent months, in real terms, after adjusting for inflation, earnings growth has already slowed.

Gardner said with inflation set to rise in the months ahead due to the weaker pound, wages were likely to come under further pressure, while employment growth was also likely to moderate if the economy slowed as most forecasters expect.

He added: “Nevertheless, we continue to believe that a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices.

Top 3 takeaways

  • The property market got off to a slow start in 2017 with house prices edging ahead by just 0.2% in January.
  • The increase left the typical UK home costing £205,240.
  • The annual rate at which house prices are rising also eased slightly, dropping to 4.3%, compared with 4.5% in the year to the end of December.

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