Real estate prices in the United Kingdom have experienced their weakest growth for more than four years: + 2.1% between May and July, compared to 8% in the same period of 2016. Explanations.
While the rise in real estate prices is accelerating in France, it is slowing down in the United Kingdom. The market experienced its weakest growth in over four years between May and July, year on year. Average house prices rose 2.1%, following a 2.6% increase between April and June, according to Halifax real estate loan specialist. Last summer, at the same time, prices in the UK had risen by more than 8% year-on-year. This is the logical outcome of the vote in June 2016 for an exit from the European Union, which, as announced a month before the British Finance Minister George Osborne, is expensive for homeowners. Before the referendum, prices increased by almost 10% per year.
The reason for this sudden slowdown? The decline in household purchasing power with inflation rising faster than wages. “The improvement in the job market has not helped drive wage growth,” said Russell Galley, General Manager of Halifax Community Bank. This tightening of purchasing power has contributed to the decrease in demand. After being above 100,000 in each of the last five months, sales fell 3% between May and June to 96,910 transactions. Never seen since October 2016 (96,740 sales). The reason? The drop in the number of mortgage approvals, leading indicator of real estate sales that fell 0.7% between May and June.
This news on the real estate market has also contributed to a decline in household confidence.
According to payments specialist Visa, consumer spending in the United Kingdom fell 0.8% in July, its third consecutive month of decline, which had not been seen since February 2013. “Consumers are penalized by the rise prices and stagnant wages, “said Kevin Jenkins, Visa’s Managing Director for the UK and Ireland.
Despite this, real estate prices remain well above the peak recorded in 2007. Thus, a house is currently selling on average 219,266 pounds (242.508 euros) against 199,332 pounds (220.461 euros) ten years ago. Sign that the UK is a two-speed real estate market, some cities continue to do well and others much less: where prices have soared 57% in the last five years in Greater London, they do not grow by 12% in Scotland – the national average of 34%. In Kensington and Chelsea, the two most expensive neighborhoods of the British capital, a property sells on average at 11,192 pounds (12,378 euros) per m²! A slightly higher price (12,320 euros) than that practiced in the most expensive district of Paris (6th arrondissement).