ONS figures indicate slowing growth in residential property market

House price inflation fell again in January, according to official government figures, with the traditional start-of-the-year surge in demand failing to materialise.

Average prices fell by 0.2% in January, said the Office for National Statistics, reversing a surprise gain in December and bringing prices back to the level they were last August.

The falls brought the annualised rate of house price inflation down to 8.4% from 9.8% in the previous month. “Annual house price growth is beginning to show signs of slowing across the majority of the UK,” the ONS said.

The London market continues to come off the boil, according to the ONS. The annual rate of increase in London house prices fell back to a 13-month low of 13.0% in January from 13.3% in December, 15.2% in November and a peak of 20.1% in May 2014.

A healthy housing market should grow around the level of inflation.
Stephen Smith, Legal & General

The ONS figures confirm data from other surveys, such as those from the Nationwide and Halifax, which are regarded as more up to date, if less comprehensive, because they reflect current market activity rather than fully completed sales.

Nationwide said house prices fell by 0.1% in February, while Halifax recorded a bigger fall of 0.3%.

Alex Gosling of online estate agents HouseSimple said: “The traditional January surge in demand for properties has not materialised.

“Tighter lending criteria has clearly taken the wind out of the sails in the mortgage market, with a dip in mortgage availability in January.

“First-time buyers are having to save more and much longer before they can get a mortgage – although the introduction of the new help-to-buy Isa should help ease the financial strain.”

More housebuilding is required to dampen prices and help first-time buyers purchase their first home, said Stephen Smith of Legal & General Mortgage Club.

“It is worth putting these figures into context as house prices are much higher than they were at the start of 2014 and in many areas are close to their 2007 peak.

“Although homeowners may see price increases as something to celebrate, steep rises are not good for the market. A healthy housing market should grow around the level of inflation to ensure that first-time buyers are able to buy a property and those who have already bought a house are able to move up the housing ladder.

“If house prices grow very quickly, then so-called second steppers can find it difficult to move house. This cuts down the supply of homes available for first-time buyers which can then lead to prices rising even further. Building more homes across the country is the best way to keep demand and supply in balance and ensure the housing market remains healthy for the future.”

Meanwhile, letting agents reported that a third of UK rents went up in February, with growing demand for properties and intense competition in London.

According to the Association of Residential Letting Agents, the UK’s professional body for letting agents, the south-east saw the highest number of landlords increasing rents, as two-fifths (41%) of agents in the region reported an increase. But there was better news for Welsh tenants in Arla’s Private Rented Sector Report, where only 13% of agents reported an increase.

David Cox, managing director of Arla, said: “Ourfindings reiterate that demand for rented accommodation is still on the increase, and monthly rents are following suite. When demand is high the premium for a home increases; house prices are still sky-high which means that getting on to the property ladder is a challenging and unlikely task for many, so renting a property is the only option available.”