Fresh mortgage lending data out this week shows that demand for property is slowing, and this could potentially place downward pressure on house prices across many parts of the country.
The number of mortgage approvals dropped to an 18-month low in July, according to new data from the British Bankers Association (BBA), which suggests that unless there is a sudden surge in cash buyers, activity levels in the housing market will almost certainly slow towards the end of the year.
Although mortgage approvals across the first seven months of the year are marginally higher than the same period in 2015, economists at IHS Markit believe that the slowdown in July may indicate that house prices could fall over the next 18 months.
Here’s what IHS Markit economist, Howard Archer, had to say following the release of the latest mortgage lending data: “We suspect that house prices could ease back by around 3% over the latter months of 2016 and there could well be a further 5% drop in 2017. This suspicion is fuelled by the BBA reporting that mortgage approvals slowed to an 18-month low in July.”
Summer is traditionally a quiet time of the year for the UK housing market and so perhaps we should not read too much into the recent dip in market activity, and wait to see what happens as we enter the traditionally busy autumn market.
Historically, September, October and November is always a busy period with those who are wishing to sell before the end of the year rushing to capitalise on the busy market before the quieter Christmas and New Year period take effect.
But IHS Markit is not the only group forecasting a fall in residential property prices.
Countrywide, the UKs largest and estate agency, also predicts that home prices will drop during the later part of 2016, before falling, albeit marginally, by 1% in 2017, led by declines in London’s prime markets.
The company estimate that home price growth across the country will slow to 2.5% this year and drop 1% in 2017 as uncertainty around Brexit impacts on the market.
Fionnuala Earley, Countrywide’s chief economist, said: “Forecasts in the current environment are trickier than ever as the vote to leave the EU has thrown up many risks.”
But Early also believes that the housing market will avoid a “hard landing”, with property prices set to return to “positive growth” towards the end of 2017 and into 2018.