Have UK house prices turned the corner?

UK house prices are showing signs of life. Nationwide data shows that the average price of a home rose 0.8% on the year in November, the fastest pace since April. With inflation running at 1.5% and wage growth at 3.5%, that means that prices are slowly falling in real terms and becoming more affordable. The house price/earnings ratio is currently at about 6.8, below its 2017 peak of 7.3 but still well above the long-term average of 4.5.

The slowdown has been most pronounced in London, says Oliver Shah in The Sunday Times. Property prices in the capital dropped 5% from their 2016 peak before a recent low; sales volumes fell 40%. Yet the "bulls are beginning to paw the ground". A 21.1% jump in the number of buyers in October and a sharp rise in the number of estate agents predicting price growth over the next 12 months suggests that the market may have turned the corner. House prices in the city picked up 1% year-on-year in October.

Yet while British house prices are now moderating compared to incomes, it may take some time for first-time buyers to feel the effect, writes Melissa Lawford in The Daily Telegraph. Housing market trends usually start in the most expensive properties and cities and then gradually trickle down into the wider market as people find themselves priced out, explains Hansen Lu of Capital Economics. Where London leads, the rest of the country often follows.

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