Annual house price growth dips into negative territory

Annual house price growth slowed to -0.1%, from 1.8% in May, the first time that annual house price growth has been in negative territory since December 2012, according to the latest Nationwide House Price Index.

UK house prices fell by 1.4% in the month of June after taking account of seasonal effects, following a drop of 1.7% in May. Nationwide also stated that on a seasonally adjusted basis, house prices in June were 3.2% lower than in April.

Mortgage activity has seen an even more dramatic slowdown, the society added, with only 9,300 approvals for house purchase in May, down from 73,700 in February and 86% lower than in May 2019.

Nationwide chief economist, Robert Gardner, suggested that despite the easing of lockdown measures expected to be announced in the coming weeks, the medium-term outlook for the housing market remains “highly uncertain”.

“It is unsurprising that annual house price growth has stalled, given the magnitude of the shock to the economy as a result of the pandemic,” Gardner commented. “Economic output fell by an unprecedented 25% over the course of March and April – almost four times more than during the entire financial crisis.

“Housing market activity also slowed sharply as a result of lockdown measures implemented to control the spread of the virus. While latest data from HMRC showed a slight pick-up in residential property transactions from April’s low, in May they were still 50% lower than the same month in 2019.

“With lockdown measures due to be eased in the weeks ahead, housing market activity is likely to edge higher in the near term, albeit remaining below pre-pandemic levels. Nevertheless, the medium-term outlook for the housing market remains highly uncertain. Much will depend on the performance of the wider economy, which will in turn be determined by how the pandemic and restrictions on activity evolve – including any behavioural shifts.”

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