House prices drop by sharpest rate in seven years - Nationwide

House prices last month fell in their steepest monthly drop for over seven years and with annual growth the slowest in almost five years.

Home prices in December dropped 0.7% compared to the month before, figures from Nationwide showed on Friday, the biggest month-on-month tumble since August 2011.

Compared to the year before, prices in December were up 0.5%, which was a significant slowing from the 1.9% growth in November and in fact the slowest annual growth since February 2013. The average forecast had been for growth of 1.5%.

For the whole of 2018, house price growth slowed to 0.5% from 2.6% in 2017.

The Nationwide survey is in line with other housing surveys, which have shown a sharp fall in buyer demand towards the end of last year, with other wider consumer surveys showing deteriorating confidence.

“Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchases, have remained broadly stable in recent months, but forward-looking indicators had suggested some softening was likely," said Robert Gardner, Nationwide's chief economist.

He also noted that the number of properties coming onto the market also slowed though this "doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers".

“It is likely that the recent slowdown is attributable to the impact of the uncertain economic outlook on buyer sentiment, given that it has occurred against a backdrop of solid employment growth, stronger wage growth and continued low borrowing costs," he added.

Nationwide expects UK house prices to rise at a low single-digit pace in 2019 as long as the economy continues to grow at a modest pace, with unemployment and interest rates remaining close to current levels.

Samuel Tombs at Pantheon Macroeconomics agreed that a sustained period of falling house prices is unlikely, with unemployment at a 43-year low and business surveys pointing to steady growth in employment over the coming months.

If the government agrees a Brexit deal, however, that would give the Bank of England the green light to begin a "proper tightening cycle", which would suggest growth in house prices is likely to remain slower than incomes, around 2% this year he predicts.

PROFESSIONALS QUIETLY CONFIDENT

Amid the consumer uncertainty, professional and opportunist property investors have never been as actives, said Jonathan Samuels, CEO of the property lender, Octane Capital. "It's about as good a buyers' market as it could get."

Mark Harris, chief executive of mortgage broker SPF, said: "Despite the political challenges in 2018, the housing market held up pretty well with low mortgage rates supporting activity. As we move closer to a Brexit resolution one way or another, there is still more uncertainty on the horizon but lenders remain keen to lend and mortgage deals competitive."

Equity analyst Robin Hardy at Shore Capital said his view was that house prices in 2019 will be "flat at best and are more likely to show a moderate rate of decline", believing new build prices are "likely to fall further than the wider market due to the additional ways in which net pricing falls can impact".

Hardy predicted that housebuilding company profits will have peaked in 2018 and actually risk showing a faster decline than the shallow fade he had been forecasting.

However, in term of investment, he still believes the sector is "looking a little oversold" and, while not expecting a rebound to anything close to the share price highs of last summer, he believes that the next movements in valuations "will be up".