UK households put the brakes on plans to move home in May, as uncertainty over the general election put them off making big spending decisions.
Buyers and sellers opted to “wait and see” ahead of today’s election according to estate agents surveyed by the Royal Institution of Chartered Surveyors. Enquiries from new buyers fell and the number of properties placed on the market dropped for a 15th month. The number of sales agreed also fell.
“Surveyors up and down the UK are observing on the ground what many others in the industry suspect; those who need to move are doing so, and those who are seriously considering it are just ‘holding off’ for a few weeks and then, regardless of the election result, are likely to get on with it,” said Brian Murphy, head of lending at Mortgage Advice Bureau.
A shortage of properties coming onto the market was reflected in a separate report from Halifax, which said a lack of supply helped to drive the first rise in house prices in five months in May. The average price of a home increased by 0.4% last month to £220,706, according to the lender.
It was the first monthly rise in house prices since the beginning of 2017 and surprised City economists, who had forecast a 0.1% fall.
Economists expect the housing market to weaken this year, as the impact of the Brexit vote weighs on the economy. Inflation is already rising at a faster pace than wages, putting pressure on household finances. However, house prices are expected to rise in 2017, albeit at a more modest pace than the 6.5% increase reported by Halifax in 2016.
“While the days of rapid house price growth fuelled by sharp increases in leverage are over, we still see scope for prices to edge up over the rest of 2017,” said Samuel Tombs, the chief UK economist at Pantheon Macroeconomics. “May’s Halifax data should allay concerns that house prices are on a downward spiral.”
Annual house price growth of 3.3% in May was the weakest in four years according to the Halifax measure, and well below the recent peak of 10% in March 2016. Prices fell by 0.2% over the past three months.
Martin Ellis, a housing economist at Halifax, said Britain’s property shortage would continue to support house price growth.
“The fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, is likely to support house price levels over the coming months,” he said.
Rics also reported a rise in UK houses prices in May, but at a slower pace. A balance of +17% estate agents reported a rise, down from +22% in April. Prices fell in central London.
Simon Rubinsohn, the chief economist at Rics, described the May survey of estate agents as “ominous”.
“Contributors still expect house prices to increase at a faster pace than wages over the medium term despite the difficulty many first time buyers are clearly having in taking their first steps onto the property ladder.
“The increasingly tight second hand market remains a cause for concern with the Rics series tracking new instructions to agents recording its fifteenth successive negative reading. It is hard to see this as anything other a major obstacle to the efficient functioning of the housing market.”