Annual house price growth slows to 1.7%: UK HPI

The lowest annual growth was in London, where prices fell by 1.6% over the year to January, following a decrease of 0.7% in December 2018. This was followed by the East of England where prices fell 0.2% over the year.

On a non-seasonally adjusted basis, average house prices in the UK decreased by 0.8% between December and January, compared with a decrease of 0.3% during the same period a year earlier. On a seasonally adjusted basis, average house prices in the UK decreased by 0.2%.

The figures show that house prices are also beginning to slow in Scotland, with the annual growth rate falling from 2.0% in December to 1.3% in January.

House price growth was strongest in Wales, increasing by 4.6% in the year to January, driven by strong house price growth in south east Wales due to the abolition of the Severn Bridge tolls.

In England, the slowdown continues to be driven by the south, where house prices fell by 0.2% over the year, compared with growth of 4.2% in the Midlands and 2.8% in northern England.

However other English regions are beginning to see a slowdown in prices, with the Midlands and the north beginning to stall and prices in the east of England falling by 0.2% over the year, the first decline seen since October 2011.

Jonathan Hopper, managing director of Garrington Property Finders, commented: “The national pace of price growth is being weighed down by the irresistible gravitational pull of London’s falling prices.

“The sheer scale of the decline in London prices – which fell by almost as much as the UK average rose – is having a distorting effect on the national picture.

“But the capital’s decline is no longer just an outlier. Average prices are now falling across Southern England as a whole, and in East Anglia, where the modest 0.2% fall is a painful reversal of fortune for a region which only a couple of years ago was a star performer.

“Elsewhere there was a marked slowdown in price rises in Scotland, and an easing of price growth in the Midlands, which have been the best-performing region for the past 18 months.

“However price rises accelerated in Northern England and Wales, two markets that offer both strong value and the greatest degree of insulation from Brexit uncertainty.

“The question of whether London’s falling prices are the result of Brexit pain or just an increasingly sharp correction of an unsustainable boom is probably moot.

"But what is not in doubt is that the capital’s distorting effect is pulling down national averages and redrawing the property map as previously unfavoured regions enjoy a moment in the sun.”

Jeff Knight, marketing director at Foundation Home Loans, said: “The OBR has already downwardly revised its forecasts for the year and we are no closer to knowing what will happen on March 29. The lowest annual rate of growth since 2013 is also a pretty clear marker. When it comes to buying behaviour, hesitation is certainly taking over.

"The flip side is that interest rates remain low and Hammond’s Spring Statement introduction of extra funding for affordable homes is designed to address the supply and demand shortfall. However, we shouldn’t let Brexit take all the blame; the fact is that lack of supply will continue to inflate prices beyond the reach of first time buyers and we shouldn’t lose sight of this. In the meantime, the rental market will provide the stepping stone and quality and choice for those saving."

Jeremy Leaf, north London estate agent and former RICS residential chairman, added: "After last month’s encouraging figures, this month’s UK HPI is much gloomier, showing once again it is dangerous to read too much into one set of numbers. However, we are finding that mood reflected on the ground - a patchy market at best in some areas whereas in other, sometimes even those adjoining, there is more optimism. This is borne out perhaps more in the numerous micro markets of London where local factors are often much more relevant than the national picture.

"Today’s inflation figures certainly won’t help affordability calculations for those who are struggling to get onto the ladder, despite recent growth in first-time buyer numbers. Sadly, while political uncertainty remains, stronger demand is likely to remain pent-up at least for a little while longer."