House prices up, inflation up, wages down

House prices up inflation up wages down

What does it all mean for homebuyers?

It’s been a week for facts and figures as the Land Registry and the Office for National Statistics release their latest updates on house prices, inflation and wages.

The Land Registry’s House Price Index for April showed an annual price rise of 5.6% and a monthly rise of 1.6%. The number of transactions however fell by 3.2% from March. That comes as no surprise as the acute lack of supply in the property market has been widely reported.

The LR pricing figures contrast with the data from other sources. The Nationwide House Price Index, for example, showed an annual rise of just 2.6% and a fall in the monthly figure of -0.4%. The Halifax House Price Index showed an annual rise of 3.8% and no change at all for the monthly figure.

Both Nationwide and Halifax have already released their figures for May, showing even slower annual price growth: 2.1% for Nationwide and 3.3% for Halifax. Perhaps more significantly, they both show that house prices have fallen for the last three months in a row.

There are regional variations of course. Yorkshire and the Humber had the greatest monthly price growth at 3.9%. The South East was the lowest – just 0.3%. So the situation in your part of the country may not reflect national trends.

As ever, these figures represent a very mixed picture and how you feel about them depends very much on where you are standing.

Further squeeze on affordability

While many homebuyers will welcome the slow down in price growth, affordability remains a key concern.  But there’s bad news for anyone saving for a deposit. The Office for National Statistics reports that inflation is at its highest for four years and is currently running at 2.9%. What’s more, average earnings fell in real terms by 0.6% in the three months to April compared to the same period last year, according to the ONS. This double whammy of higher outgoings and lower incomes will no doubt have a significant impact.

If you are a first time buyer desperately saving for a deposit, the fall in price growth will be welcome. However, that will be scant comfort as living costs rise, wages stagnate and saving becomes even more difficult.

The silver lining is interest rates, which remain at 0.25% (for the time being anyway). With mortgages available at an initial rate of 1.5%, monthly mortgage payments are as affordable as they ever will be.

If you have managed to overcome all these obstacles and you’re ready to buy a home – congratulations! Remember to factor in your legal costs when you’re planning your move so you don’t get any nasty surprises. You can get a conveyancing quote here to give you an idea of how much you are likely to have to pay.

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