The Bank of England’s Monetary Policy Committee has decided to keep the base rate unchanged at 0.5 per cent this month.
The vote amongst the nine members was 7-2 - unchanged from the previous month. It said that the weak economic growth at the start of the year may have been influenced by the weather, but it wanted more substantial evidence of economic activity before any future increase.
The decision has been greeted with a sigh of relief amongst estate agents following a slew of disappointing figures suggesting the housing market has failed to take off this spring.
“You only need to look at the fact that the real economy remains challenging and it becomes self-evident that the price of property is a stretch for many consumers. Moreover, the property market is naturally self-regulating thanks to the balance between supply and demand and affordability. In reality, “Weare now seeing more properties coming to market which is giving buyers more choice. Asking prices are consequently being reviewed and this mechanism in effect controls housing inflation without the requirement to change the base rate” says David Westgate, chief executive of Andrews Property Group.
The latest RICS Residential Market Survey for April has shown a stock average of 42.2 properties per branch - scarcely ahead of the record low of 41.8.
New buyer enquiries were broadly unchanged during April, meaning it has now been 13 months since this measure was last in positive territory. Only eight per cent more surveyors said they expect sales activity to increase rather than decrease over the next 12 months.
This has not been the only indicator of a tough housing market that is likely to have influenced the Bank of England today.
Savills says London land prices have fallen two per cent in the first quarter of 2018 and by 12 per cent over the past three years, while Strutt & Parker has predicted that in a worst-case scenario house prices in prime central London may drop another five per cent this year.
The Halifax earlier this week reported that house prices fell by 3.1 per cent in April, although tried to soften the blow by saying that just one month’s figures would be open to more volatility than longer-term data.
On top of all that, to emphasise affordability issues, a survey of 3,000 people by MyJobQuote has shown that more than one in three current home owners wouldn’t be able to afford their property if it were listed on the market at today’s value.
They said their properties were on average some £50,000 more than their original purchase price, taking them out of their price range now.