The average asking price in the UK fell 0.4% in June compared with the previous month according to new data released by Rightmove yesterday, but property investors should take short-term home price changes with a pinch of salt and look at what is happening in longer-term trends, according to Jeremy Duncombe, a director at Legal & General Mortgage Club.
The mortgage expert points to the fact that although the average asking price this month dropped to £316,109, down from a peak of £317,281 a month earlier, prices are still up 1.8% on an annual basis.
Although this is the lowest rate of annual price growth since April 2013, the fact is that residential property prices are still increasing, which is good for some investors. But there is also a concern that in cities where affordability levels are stretched fewer households are able to participate in the market.
Duncombe said: “Although the data shows a minor decrease in monthly house price growth, on a year-on-year basis, house prices are still rising. Potential buyers are having to increase their borrowings, or depend on family members to help fund a deposit.
“For many workers, price increases are occurring at an unattainable rate, with house prices now at a record 7.6 times earnings. For London, this is stretched to more than 10 ten times.”
Part of the cause for higher property prices is the fact that demand continues to outweigh supply across many parts of the UK, which once again highlights the desperate need for more new homes, including affordable housing, to be developed.
Duncombe added: “Once the dust has settled in the newly-formed government, the task of building more affordable housing needs to become an urgent priority on the agenda.
“Building affordable housing in the right places will help first time buyers to take their first steps onto the property ladder.”