The ONS released updated figures for the UK House Price Index on 18 April stating:
Average house prices in the UK have increased by 4.4% in the year to February 2018 (down from 4.7% in January 2018). The annual growth rate has slowed since mid-2016 but has remained generally under 5% throughout 2017 and into 2018. Average house prices in the UK decreased by 0.1% on the month.
This fall in UK house price growth is driven mainly by a fall in London. Average house prices in London decreased by 1.0% in the year to February 2018 (down from a 1.3% increase in January 2018), which continues the London slowdown since mid-2016.
Most of the news coverage has focused on the fall in London, but this hasn’t come as a surprise.
This is predominantly as a result of increased stamp duty at the upper end and an additional 3% on top for investment property. Whatever glimmer of confidence there was, has been blown out by Brexit and market uncertainty.
Again as the Southeast market is closely linked to London and Londoners continue to migrate outwards, this slow down is not a surprise. However in the longer term, I would expect more resilience.
As the EPC minimum rating has now kicked in, (as of 1 April 2018) it will be interesting to see if many landlords are caught out on their next let. I think it is only a matter of time before we see more buy-to-let landlords exit the market – especially if buy-to-let properties require material works to upgrade energy ratings, on top of tax hikes, removal of interest offset and changes to mortgage affordability.
The level of turnover will be very slow. Those sellers that have to move or exit will take the lower prices on offer and eventually it will bottom out.
These are uncertain times where hefty stamp duty is a reality – this inevitably has an impact on house prices but I do believe London will find its equilibrium.
— Rob Weaver, Director of Property
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