Property inflation slipped back to 3.3 per cent in May, the smallest annual growth in house prices for four years, the latest monthly index from Halifax shows.
At £220,706 in May, the value of an average British home was up almost £1,000 on April, but is nearly £1,500 down on the peak recorded in December 2016.
The 3.3 per cent annual increase is around a third of the surging growth seen at the start of last year, before the EU referendum – although the average home remains £7,400 more expensive than it was a year ago.
Supply and demand: Low numbers of homes for sale is likely to keep propping house prices up
The continuing rise in house prices has stretched affordability, with property values now at the same level compared to wages as they were at the peak of the 2000s boom.
Martin Ellis, a housing economist at Halifax, said: ‘The fact the supply of new homes and existing properties available for sale remains low combined with historically low mortgage rates and a high employment rate, is likely to support house price levels over the coming months.’
Halifax, one of Britain’s biggest lenders, pointed to recent HM Revenue and Customs figures showing property sales fell three per cent between March and April.
It said Bank of England figures have shown the volume of mortgage approvals for house purchase – indicating completed sales – also fell two per cent between March and April.
Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, said: ‘The Halifax figures are interesting as they reinforce findings from other recent surveys, suggesting that we should be concentrating not just on increasing supply of new homes but encouraging existing home owners to move.
‘Buyers and sellers have been in limbo recently with the market awaiting more certainty from the General Election and Brexit negotiations.’
Downwards: The top line shows how annual property price inflation has slipped in the last 12 months
Nationally, house prices in May 2017 are 11 per cent above their August 2007 peak according to Halifax.
The average house price is now £66,043 – or 43 per cent – higher than the low point of £154,663 in April 2009.
Ticking higher: Affordability continues to be a big factor for many would-be home buyers
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said May’s Halifax data should allay concerns that house prices are on a downward spiral.
He said: ‘Admittedly, average prices still are 0.7 per cent below their December 2016 peak, but Halifax hasn’t reported a month-to-month decline in prices since January.
‘Recent further falls in mortgage rates are helping home buyers to take out slightly larger loans, even though their real wages are falling.
‘In addition, prices are being underpinned by a sharp reduction in supply.
‘The extremely low rate of job losses means that few home owners are being forced to sell their homes and many are deciding to delay listing their homes until the market strengthens again.
‘So, while the days of rapid house price growth fuelled by sharp increases in leverage are over, we still see scope for prices to edge up over the rest of 2017.’
Overall: House prices are up by just over £7k in a year, the Halifax data shows
Mortgage rates have continued to hover near historic lows, with headline two-year fixed rates starting from 1.14 per cent.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘There has been quite a bit of repricing downwards on mortgage deals in the past week, with Accord, Virgin Money, Platform, New Street and Tesco all cutting rates.
‘Lenders are keen to lend and with the mortgage market oversupplied in all areas, pricing is likely to remain competitive for the foreseeable future.
‘This is particularly good news for borrowers who are coming up to remortgage.’