Halifax today released their latest data on the UK housing market and house prices, based on their data on mortgage applications and approvals. The latest index shows that annually, prices have increased by 2.2%, but have remained static quarterly, and fallen marginally in January by 0.6%.

Monthly Growth

-0.6%

Quarterly Growth

0.0%

Annual Growth

2.2%

This is the second consecutive month that Halifax has noted a fall in prices after they peaked at a record £226,408 last November. But the market remains in good health despite a tough year with Halifax recording 1.23 million sales across the UK in 2017, slightly higher than the 1.2 million average a year seen since 2013, and much healthier than the 890,000 annually over the previous five years.

Halifax basis its index on mortgage approvals, so while this doesn’t always translate to sales completions, it does give a good indicator of market health. As expected, Halifax saw a sharp reduction in mortgage approvals in December as the market wound down for Christmas, but despite a very tough time for the market in 2017, overall mortgage approvals fell by just 2% when compared to the same period in 2016.

This slight reduction in buyer demand as a result of wider market uncertainty was also seen on the sellers’ side of the fence, as new instructions to sell continued to deteriorate for the 23rd month, the worst in eight years. This is largely due to the majority of sellers deciding to adopt the ‘wait and see’ approach to their sale, rather than marginally adjust their price expectations to secure a sale in this climate.

So while buyer interest has dwindled slightly, the stock available has also reduced which in the long term will see house prices remain buoyant.

However, one group of buyers has seen an uplift – the nation’s first-time buyers. It is estimated that the number of first-time buyers has reached 359,001 in 2017, a 6% increase continuing a six-year upward trend. First-time buyers now account for a whopping half of all house purchases with a mortgage, up from 14% just ten years ago.

This is despite the increasing unaffordability of the UK market and aided by low mortgage rates and the abolition of stamp duty for first-time buyers on properties under £300,000. However, this initiative could potentially do more harm than good in the long run, as the Emoov CEO, Russell Quirk, explains…

With wage growth failing to keep pace with consumer prices, the immediate aftermath of the festive season is a tough time of year for all as demonstrated by this rather fitting market freeze. January is always a struggle and even with the current low cost of mortgage rates, market activity will remain predictably muted as buyers look to find their stride financially.

Price growth will soon thaw and as the market gains momentum into spring and summer the pick-up in buyer interest and market activity will see prices once again on the up.

While it may be too soon to see any direct impact from the abolition of first-time buyer stamp duty, a number of industry sources are reporting a strong uplift in buyer demand among this demographic.

But as we are all too aware, there is a severe lack of building stock to quench the thirst of the nation’s aspirational buyers as it is, let alone with this additional influx of interest.

As a result, it is possible that another Government initiative to ‘help’ those priced out of the market could inadvertently see prices increase as demand is fuelled and further outweighs supply.

There is also a chance that shrewd sellers in the £280,000 region will increase their asking prices to sit just below the stamp duty threshold in order to maximise their property potential in an otherwise slower market. If this were to happen, prices would see an additional boost as a result, but to the detriment of struggling buyers.

Russell Quirk

Founder and CEO , Emoov.co.uk