House prices drop by 0.9% in January

Houses prices in the UK fell by 0.9% in the first month of 2017, the first monthly drop since August 2016 after four successive monthly increases including a 1.6% jump in December, according to the latest Halifax house price index.

This means the annual rise house prices in the three months to the end of January was 5.7% compared to the same three months a year ago and up by 2.4% on the previous quarter ending in October 2016.

It takes the average house price down to £220,260, though the annual rate slowed from December when it was 6.5% after two previous increases from a low of 5.2% in October 2016. This remains well below the 10% annual rise in house prices recorded in March 2016.

House prices are up £7,783 on a year ago and £3,534 on June, the month the UK voted to leave the EU after the Brexit vote, according to Halifax.

Martin Ellis, Halifax housing economist, said: “The quarterly and annual rates of house price growth remain robust even though they are lower than in spring 2016.

“UK house prices continue to be supported by an ongoing shortage of property for sale, low levels of housebuilding, and exceptionally low interest rates. These factors are unlikely to change materially during 2017.

“Nonetheless, weaker economic growth and increasing pressure on spending power, along with affordability constraints, are expected to dampen housing demand, resulting in some downward pressure on annual house price growth during the year.”

Halifax reports that first-time buyer numbers increased by 7% in 2016, to 335,701, the highest level since the financial crisis in 2007 when there were 359,900 first-time buyers.

In total, there were 1.23m UK homes sales in 2016, up marginally, by 0.4% on 2015 with sales in the final quarter of 2016, 0.5% higher than in the third quarter of 2016, though 9% lower than in the final quarter of 2015.

Mortgage approvals between November and December were up by 1%, to 67,900, reaching the highest level since March 2016 when they were boosted by buyers aiming to complete before the increase in stamp duty on second homes and buy to let mortgages that came in in April 2016.

However, Halifax said the supply of new homes remains very slow with new instructions failing to pick up in December, the 10th month in a row where there has not been an increase, leaving stock record close to record lows and restricting choice for potential buyers.

Howard Archer, chief UK and European economist at IHS Global said: “January’s correction in house prices reported by the Halifax fuels our belief that house price gains over 2017 will be no more than 3%.

“However, the downside for house prices will be limited markedly by a shortage of houses for sale. Ongoing very low mortgage interest rates should also help the housing market.

 The Halifax data follows Nationwide’s house price index which showed a small monthly increase of 0.2% in January after a 0.8% increase in December