In late 2014 then chancellor George Osborne announced plans to radically change the way people are taxed when moving home. Within a few months the number of homes on the market plummeted.
Four years on, following two general elections and one referendum, they still haven’t recovered – and that lack of homes for sale might be the only thing stopping house prices crashing.
“House price growth has slowed, whilst building activity, completed sales and mortgage approvals for house purchase have all remained flat,” said Russell Galley, Halifax Bank’s managing director.
Figures released by Halifax today show house prices dropped 0.6% from November to December, but still finished the year 2.7% up annually.
It was the third monthly fall in prices recorded by the bank in 2017, in a year that saw annual gains slip from 6.5% in January to less than half that by the end of December.
“This is driven by a combination of the continuing uncertainty regarding the future of the UK economy, and the ongoing challenge for prospective buyers to build up the appropriate deposits to support purchases,” Galley explained.
And the problem of affording a home is one that won’t improve unless wages rise, or prices fall.
Uncomfortably similar to the great crash
Separate figures from Halifax show the average house now costs the equivalent to more than five-and-a-half times the average salary – compared to four-and-a-half times five years ago.
That’s almost identical to the ratio when house prices began their collapse in late 2007.
“A decade on from the financial crash, there’s an uncomfortable similarity in the ratio of the average property price to the average salary,” said Jonathan Hopper, managing director of Garrington Property Finders .
Given wages have not been keeping up with the cost of living and low interest rates mean savings haven’t either, it’s no surprise that house prices are stalling.
So what’s stopping them fall?
Simple – while there might not be a lot of people who can afford prices at the moment, they are all chasing remarkably few homes for sale. And that’s likely to continue for some time.
“It’s the lack of supply rather than the strength of demand that is keeping annual price growth in the black,” said Jonathan Samuels, chief executive of property lender Octane Capital .
“Prices would perhaps have fallen further were it not for the sheer lack of supply.”
Why are there so few homes for sale? Well, while low interest rates hurt savers, they help existing homeowners which means fewer forced sales – couple that with high employment and the large cost of moving, and people simply aren’t selling up.
On top of that, there’s no influx of new properties either. And unless something changes to get a flood of homes onto the market, you can expect more of the same in 2018.
“UK house prices in general are likely to be supported, seeing modest growth in 2018, through the combination of a shortage of properties for sale, continued low levels of housebuilding, low unemployment levels and finally good levels of affordability due to the low interest rate environment,” Galley said.