Over the last ten years, the average UK house price has risen 10% from August 2007, to £219,266 in July 2017. The average deposit has increased too, from £68,663 in 2012 to £96,109 in 2017. However, after several years of continued growth, the UK property market is now showing signs of slowing down.

The housing market is notoriously sensitive to economic confidence, and many experts are predicting that against the backdrop of the ongoing Brexit negotiations, conditions for households could remain challenging for the next couple of years. Inflation is likely to eat into budgets and interest rates may have to rise. This may well signal a period of lower house price growth.

However, the post-Brexit house price crash that many commentators predicted, including the International Monetary Fund, has so far failed to materialise.

Slowdown in growth

Over the last few months, the number of families moving has started to slow, leaving fewer properties available for first-time buyers, according to figures from Lloyds. Its data shows movers for the first six months of 2017 at 171,300, down 2% on the first half figures for 2016.

The UK’s biggest mortgage lender, Halifax, reported in August that annual house price growth had slowed to its lowest rate in four years, and the official surveyors’ body, the Royal Institution of Chartered Surveyors, reported that market activity was back to levels last seen in 2011.

London has seen the biggest falls. Many had assumed that with a lower pound, more foreign buyers would have been active in the market, however uncertainty over Brexit has caused European buyers to stay away. Another factor in the capital’s property slowdown is the lack of landlords entering the buy-to-let market, due largely to the introduction of the new tax rules on mortgage interest and increased stamp duty.

Going up and down

With estate agents continuing to report a lack of new stock coming onto the market, particularly family homes, more and more homeowners are considering their options. Some choose to extend upwards into loft space, while others are going underground and opting for basement extensions. Research from the Halifax that analysed planning data for England, Scotland and Wales for January 2012 to December 2016 showed planning applications for basements had risen by 183%.

The flatter trend in price growth could be a silver lining for those who have been kept out of the housing market by the seemingly relentless rise in prices, and means that more first-time buyers are able at last to find a home they can afford to live in.

The information within the article is for information purposes only and is purely market commentary and does not constitute individual advice.