London’s housing crisis is the bane of many of our lives. The astronomical cost of renting eats up a large portion of our pay cheques each month and for some of us, it’s more likely we’ll flee the capital or leave the country altogether than be able to afford to buy a home.
So, we were heartened to read that the housing market seems to be cooling off slightly – and it's mostly thanks to Brexit. UK house prices dropped by 0.1% from July to August, bringing down the growth rate for the year, according to mortgage lender Nationwide, as reported in The Guardian.
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While it may not sound like much of a decline, it marks a three-month low and highlights the effect of uncertainty over Brexit, stagnant wage growth and a slowdown in the pace at which mortgage rates are falling.
The annual house price growth rate is now 2.1% as a result of the recent drop, the same level as in May and the lowest rate in four years, The Guardian reported. In July it was 2.9%. “The slowdown in house price growth to the 2-3% range in recent months from the 4-5% prevailing in 2016 is consistent with signs of cooling in the housing market and the wider economy," said Nationwide’s chief economist, Robert Gardner.
Economic growth has halved since 2016 to about 0.3% in the first half of this year and fewer mortgages have been approved for wannabe homeowners, with the rate dropping to the lowest rate in nine months in June. Surveyors have also said they're receiving fewer inquiries from aspiring homeowners at the moment.
The UK economy initially showed signs of resilience in the months following last June's Brexit vote – it grew by 0.5% in the third quarter and by 0.7% in the final quarter of the year, The Independent reported. However, the tide has turned this year, with an increase in inflation having reduced consumer spending. The UK economy's growth rate is now the lowest in the G7 group of large, developed economies that includes the US, Canada, France and Germany.
Despite the recent drop in house prices, the picture isn't looking good for those of us hoping to get a foot on the housing ladder. “Prices likely will continue to struggle to rise much, given that inflation still has further to rise, consumer confidence has deteriorated sharply since June and lenders intend to reduce the supply of unsecured credit," Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, told The Guardian.
The severe lack of available housing in the UK also means that prices look to remain pretty high – currently, the number of homes available is at a 30-year low. This month, the average house price stands at an eye-watering £210,495. Great, just great.