London house price fall offset by strong rises in the north

House prices fell 1.8 per cent in London over 2019, according to figures from Nationwide building society showing strong rises in the north and midlands offset weakness in the capital and the home counties.

Annual UK house price growth edged up as the year drew to a close, with prices 1.4 per cent higher than December 2018, the first time it has been above 1 per cent for 12 months.

Nationwide, the UK’s second largest mortgage lender, said it expected prices to remain “broadly flat” over the coming year.

The report showed a clear north-south divide with prices also posting an annual fall of 1 per cent in the outer southeast region.

Scotland was the strongest performing region in 2019, with prices up 2.8 per cent over the year, followed by the west midlands on 2.7 per cent and the north of England on 2.6 per cent.

The housing market was supported by robust labour market conditions, with employment rising at a healthy rate in recent years and earnings growth slowly regaining momentum, it said.

Robert Gardner, Nationwide’s chief economist, said while there had been a recovery in the number of first-time buyers, the main challenge they faced was raising a deposit.

“Even in the north and Scotland, where property appears most affordable, it would still take someone earning the average wage and saving 15 per cent of their take-home pay each month for more than five years to save a 20 per cent deposit.”

Overall, Mr Gardner said the underlying pace of growth appeared to slow through the year as a result of weaker global growth and an intensification of Brexit uncertainty.

“Healthy labour market conditions and low borrowing costs appear to have offset the drag from the uncertain economic outlook,” he said, adding future price moves would depend on how quickly uncertainty about the UK’s future trading relationships lifts as well as the outlook for global growth.

“Overall, we expect the economy to continue to expand at a modest pace in 2020, with house prices remaining broadly flat over the next twelve months.”

Figures for mortgage lending from the Bank of England pointed to continued stability. Net mortgage borrowing by households was £4.1bn in November, and the annual growth rate of 3.3 per cent was within the broad range it has been for the last three years.

Separate figures showed new house building dropped for the seventh month running in December. The fall contributed to a contraction in the overall construction sector, according to the monthly purchasing managers index run by the Chartered Institute of Procurement and Supply.

The headline index fell to 44.4 from 45.3 in November on a scale where 50 marks the divide between expansion and contraction. Civil engineering activity fell at its sharpest pace for 10 years while new business volumes also fell.

“House building has been the most resilient category in recent months, but still declined overall during December,” said Tim Moore, economics associate director at IHS Markit, which compiled the survey.

“Brexit uncertainty and spending delays ahead of the general election were once again the most commonly cited factors highlighted by firms experiencing a drop in construction activity.”