Households are under pressure to keep up with the UK inflation rate. Although employment levels have steadily been rising since November 2017, national pay growth has been rising slowly by comparison. In fact, the current UK inflation rate is 0.6% higher than national pay growth, which has resulted in tighter budgets for UK households.
Inflation has created a correlation in the real estate market where housing prices have dropped by 0.6%. This has also reduced annual house price growth to 2.2%, which is the slowest rate in the last 6 months. While these developments don’t bode well for the market, the abolition of stamp duty may have a positive effect over time.
- The UK job market has grown by 102,000, while national pay growth has remained slow 2.4%.
- Inflation is outpacing national pay growth by 0.6% which correlates closely to a 0.6% drop in house prices.
- Stamp duty was abolished for purchases of up to £300,000 last November, which may positively impact property prices in the future.
UK house prices fell for a second consecutive month in January as consumers struggling with shrinking disposable income put major spending decisions on hold.
The average price of a home in Britain fell 0.6% last month to £223,285, according to the mortgage lender Halifax. It followed a 0.8% drop in prices in December and drove down annual house price growth to 2.2%, the slowest rate in six months.
Halifax’s Russell Galley said house prices fell despite a backdrop of rising employment in Britain and the government’s decision to scrap stamp duty for first time buyers on homes selling for up to £300,000.
“High inflation and low economic visibility amid ongoing Brexit negotiations are holding the property market to ransom. While the lack of supply and low borrowing costs rule out a material deterioration in prices, the cost of living and caution around the UK’s exit from the EU are starting to get the upper hand,” he said.
View the original article at The Guardian