The Telegraph are reporting today that:
First-time buyers seized on weak house price growth in 2019 to snap up property at the fastest pace since before the financial crisis.
A lull in price rises combined with rising employment and surging wages helped 354,400 buyers on to the housing ladder in the 12 months to October, according to Nationwide. That was more than double the 2009 low.
House prices edged up 0.1pc on the month in December and were just 1.4pc higher than the same month of 2018, at an average £215,000.
Wages are growing at 3.2pc a year, according to the latest release from the Office for National Statistics, meaning buyers’ income stretches further. Interest rates also remain close to record lows, meaning historically high levels of debt are relatively affordable.
A total of 65,000 people took out mortgages to buy homes in November, Bank of England data shows, marking a modest rise compared to a year earlier. The typical new mortgage comes with an interest rate of below 1.9pc.
Nationwide expects prices to remain roughly flat prices in 2020, potentially giving first-time buyers a further clear window to get onto the ladder.
Robert Gardner, Nationwide’s chief economist, said: “The trend is partly due to robust labour market conditions, with employment rising at a healthy rate in recent years, and earnings growth slowly regaining momentum.
“Low borrowing costs have also provided important support. Even though house prices remain high relative to average incomes, the cost of servicing the typical mortgage as a share of take-home pay has remained close to or below long run averages in most parts of the country.”
Price growth slowed sharply in 2019
Line chart with 41 data points.
Every quarter was weaker than in 2018
The chart has 1 X axis displaying categories.
The chart has 1 Y axis displaying % change, year on year. Range: -5 to 15.
View as data table. Price growth slowed sharply in 2019
% change, year on yearPrice growth slowed sharply in 2019Every quarter was weaker than in 2018Annual price growthQ4 2009Q2 2010Q4 2010Q2 2011Q4 2011Q2 2012Q4 2012Q2 2013Q4 2013Q2 2014Q4 2014Q2 2015Q4 2015Q2 2016Q4 2016Q2 2017Q4 2017Q2 2018Q4 2018Q2 2019Q4 2019-5051015Source: Nationwide
End of interactive chart.
Just as Brexit uncertainty was a factor holding back prices last year, he expects progress in EU negotiations this year to be important.
Mr Gardner said: “Economic developments will remain the key driver of housing market trends and house prices. Much will continue to depend on how quickly uncertainty about the UK’s future trading relationships lifts as well as the outlook for global growth.
“Overall, we expect the economy to continue to expand at a modest pace in 2020, with house prices remaining broadly flat over the next 12 months.”
Prices vary hugely by region. Scotland led the market in 2019 with growth of 2.8pc on the year to an average £152,000. The West Midlands was next with prices up 2.7pc at £193,000, followed by the North of England with a rise of 2.6pc to £129,000.
At the other end of the scale London’s prices fell 1.8pc to £458,000, while those in the rest of the South East were down by an average of 1pc to £274,000.
The wide gap in property values between the North and South makes it difficult for first-time buyers near London to save up for a deposit.
To get a 20pc deposit, a worker on the average wage would have to save 15pc of their take home pay for a little more than five years in the North and in Scotland. This rises to 15 years in London.
Only once they have that deposit can they take advantage of the ultra-low mortgage rates that make even a large debt relatively affordable.
If prices keep growing more slowly than wages, it should gradually make homes easier to buy.
Tom Aboody, at property lender MT Finance, said: “It is still taking buyers many years to raise the necessary deposit. We hope that with government assistance, pricing stagnation and continued cheap mortgage rates, this can be reduced.”
The construction industry as a whole struggled at the end of the year, with business activity down for the eighth consecutive month.
IHS Markit’s purchasing managers’ index fell to 44.4 in December, firmly below the 50 level that indicates growth.
Housebuilding and commercial property work both fell, while civil engineering activity collapsed around the election at the fastest pace since 2009.
Business customers in particular have been holding off making any major financial commitments at a time of political uncertainty, so analysts hope the Conservatives’ victory will boost sentiment quickly.
Economist Tim Moore at IHS Markit said: “Construction companies signalled that business optimism has recovered to its strongest for nine months. Survey respondents cited confidence that a more predictable domestic political landscape and clarity on Brexit could deliver a much-needed boost to clients’ willingness-to-spend in 2020.