UK house prices fell for the first time in half a year last month, as a squeeze on household spending continued to take its toll.
According to Nationwide’s monthly index, house prices fell by 0.3 per cent in February compared to the previous month, after enjoying a 0.8 per cent increase in January. Reuters said that consensus amongst its forecasters had been for a 0.2 per cent increase.
Compared to February 2017, prices rose by 2.2 percent, a marked slowdown from the 3.2 per cent annual growth rate recorded in January.
“Month-to-month changes can be volatile, but the slowdown is consistent with signs of softening in the household sector in recent months,” Robert Gardner, Nationwide’s chief economist, said.
“Retail sales were relatively soft over the Christmas period and at the start of the new year, as were key measures of consumer confidence, as the squeeze on household incomes continued to take its toll,” he added.
Inflation spurred by a fall in the value of the pound in the immediate aftermath of 2016’s Brexit vote has squeezed consumer spending, hampering the broader economy. The UK was the slowest growing of the G7 economies in 2017.
“How the housing market performs in the year ahead will be determined in large part by developments in the wider economy and the path of interest rates,” said Mr Gardner.
“Brexit developments will remain a key factor, though these remain hard to foresee,” he said.
Nationwide said that it continues to expect the UK economy to grow at a modest pace, with annual growth of 1 per cent to 1.5 per cent this year and next.
“Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth,” said Mr Gardner.
The average monthly house price in the UK stood at £210,402, according to Nationwide, down from £211,756 in January and up from £205,846 in February last year.