House prices fall for the first time in five years

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The Halifax house price index indicates prices are falling, with even surveyors starting to reduce valuations – but a shortage of homes and low mortgage rates is expected to prevent a crash.

House prices fell by 0.2% between February and April, marking the first quarterly fall in prices in five years, new research by the Halifax has revealed.

Property values have stalled this year due to factors such as a squeeze on household incomes due to increasing inflation and a reduction in job creation, which have led to the first fall in house prices since November 2012.

Halifax said that the average price of a house in the UK fell to £219,649 in April from £219,649 in March. House prices reaches an all-time high in December 2016 with an average cost of £222,190 – but the new data shows that almost £3,000 has been wiped off of that in the past few months.

Announcing the data, Halifax’s housing economist Martin Ellis said:

“Housing demand appears to have been curbed in recent months due to a deterioration in housing affordability driven by the sustained period of rapid house price growth during 2014-16.

“Signs of a decline in the pace of job creation, and the beginnings of a squeeze on households’ finances as a result of increasing inflation, may also be constraining the demand for homes.”

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Despite the trend in falling prices, Ellis allayed fears of a housing slump by stating that the continued low mortgage rates and housing supply issues should underpin house prices in the coming months.

The report by the Halifax (which you can see in full here) also questioned consumer confidence in the current housing market, and found that sentiment about whether house prices will be higher or lower this time next year has improved.

Almost 60% of people now expect the average house price to go up in the next year, compared with 14% who think it will go down.

The new house price data comes after the latest Bank of England figures last week showed that the amount of mortgage approvals fell to a 6 month low in March. That was the second month in a row that saw a fall in the amount of people getting approved for a mortgage after a similar fall in February.

Cost of renting in London also falls for first time in 10 years

In other news, three different indexes have shown that the cost of renting in London fell in April for the first time since 2009.

Data from the Homelet index shows that rental prices in London dropped by 1.7% from March to April, with an average rental price of £1,519 down from the previous £1,546 per month.

That follows similar data from YourMove which also pointed to a sharp decrease in monthly rents.

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In fact, the cost of rent for new tenancies signed across the UK in April were just 0.4% higher on average than in the same month last year, the lowest year-on-year growth recorded since February 2010.

The rental price inflation in April means that tenants that signed up to a new tenancy agreement last month have to pay an average rent of £904 a month – or £754 outside of London.

The Homelet data reveals the places in the country where rents are increasing faster are those that experienced less rapid rental price inflation during 2016 – which is why rental prices in London as well as the South East as a whole spiked so sharply.

Another index tracking rental prices – from Countrywide estate agents – showed that rents had their first annual decrease for 6 years in March.

Countrywide said their data pointed to a boom in buying property before the increase in stamp duty last year led to the high supply of rental properties – but demand for rental homes has been falling, especially in London.