House price growth eases in January - Halifax

Annual house price growth in the UK eased in January, according to the latest data from lender Halifax.

House price growth slowed to 0.8% on the year last month from 1.3% in December, missing expectations for a 1.5% increase.

On the month, house prices were down 2.9% in January following a 2.5% rise in December. Analysts had pencilled in a 0.5% decline.

Halifax managing director Russell Galley pointed out that this is the second time in three years that there has been a drop as a new year starts.

"However, the bigger picture is actually that house prices have seen next to no movement over the last year, with annual growth of just 0.8%," he said.

"This could either be viewed as a story of resilience, as prices have held up well in the face of significant economic uncertainty, or as a continuation of the slow growth we’ve witnessed over recent years.

"There’s no doubt that the next year will be important for the housing market with much of the immediate focus on what impact Brexit may have. However, more fundamentally it is key underlying factors of supply and demand that will ultimately shape the market.

"On the supply side the most constraining factor to the health of the market is the shortage of stock for sale, although this does support price levels. On the demand side we see very high employment levels, improving real wage growth, low inflation and low mortgage rates. All positive drivers tempered by the challenges of raising deposits. On balance therefore we expect price growth to remain subdued in the near term."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said house prices are likely not falling at anywhere near the rate implied by the Halifax index, which is "extraordinarily volatile".

"A near-3% month-to-month fall in its index last occurred as recently as April. January’s big drop also followed a 2.5% jump in prices in December. Other data point to a flat trend in prices. For instance, data from Nationwide indicate that house prices were unchanged on a three-month-on-three-month basis in January. The average mortgage approval value fell by a modest 0.5% on a quarter-on-quarter basis in Q4, but it still rose slightly in year-over-year terms.

"Uncertainty about Brexit appears to be the main driver of the near-term weakness in house prices. After all, mortgage rates have held steady while real income growth has picked up in recent months. Despite the current impasse, we still expect a Brexit deal to be signed off just before the March deadline, enabling consumers’ confidence to recover and ensuring that house prices rise marginally over the course of 2019. But with timely indicators of house purchase demand flashing red, a temporary near-term dip in prices shouldn’t be ruled out."