Annual house price growth of 2.6% marks the slowest rate of growth since June 2013 as rising inflation and static wages are putting people off pursuing their dream of home ownership.
It is second consecutive monthly decline with average house prices currently standing at £207,699.
UK housebuilders have remained relatively resilient to the news with shares in Taylor Wimpey (TW.), Barratt Developments (BDEV) and Bovis (BVS) up to 0.7% lower.
In April, we flagged slowing housing price growth and why experts dismissed concerns over the market outlook.
Nationwide chief economist Robert Gardner says: ‘The household saving ratio, which measures how much income goes unspent each quarter, fell to an all-time low of 3.3% in the fourth quarter.’
Gardner believes that people are going to tightening their budgets due to rising inflation, but highlights that spending on big ticket items such as cars has remained robust.
IHS Markit UK economist Howard Archer is not as upbeat, arguing the drop is ‘compelling evidence’ the market is being affected by more pricing pressure on consumers and their concerns over the economic outlook.
He has cut his forecast for house price gains this year to 2% and warns it could come in lower than that, although he throws doubt on whether the UK General Election in June will affect the market.
The UK economy experienced its slowest rate of growth since the first quarter of 2016 at 0.3% in the first three months of 2017 according to the Office for National Statistics.
The services sector is the biggest drag on growth as it expanded 0.3% compared to 0.8% in the last quarter of 2016.
