UK house prices increased by 0.6% in August, resulting in a slight pickup in the annual rate of house price growth to 5.6%, from 5.2% in July, although this remains within the 3-6% range prevailing since early 2015.
“The pick up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months,” said Robert Gardner, Nationwide’s Chief Economist, said.
New buyer enquiries have softened as a result of the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum. The number of mortgages approved for house purchase fell to an eighteen-month low in July.
However, the decline in demand appears to have been matched by weakness on the supply side of the market. Surveyors report that instructions to sell have also declined and the stock of properties on the market remains close to thirty-year lows. This helps to explain why the pace of house price growth has remained broadly stable.
“It is no surprise to us that Nationwide’s figures have shown a marginal increase in property values,” says Managing Director of netanagent.com, Alex Thorpe. “Despite warnings pre-Brexit, we have seen homeowner confidence remain steady.
“Predictions have been dire, and we saw a noticeable dip in interest in the run-up to Brexit, but immediately post we saw valuation requests rise by 40%, the biggest rise we have seen since our launch in 2012, demonstrating solid homeowner confidence.
“Whilst Brexit has the potential to develop into a strong headwind, we have three powerful tailwinds, namely; mortgage availability which remains solid, high levels of employment, and a chronic lack of house building. These three combined continue to drive the property market.”
However, as analysts keep warning us, it is still early days. “We’re still wary about the long-term fallout from Brexit, but it’s too soon to know what this is,” said Gardener. “For now, it’s a matter of confidence which remains strong amongst homeowners.
“What happens next on the demand side will be determined, to a large extent, by the outlook for the labour market and confidence amongst prospective buyers, said Gardener.
“It is encouraging that the unemployment rate remained at a ten-year low in the three months to June, though labour market trends tend to lag developments in the wider economy. It is also positive that retail sales increased at a healthy rate in July, up almost 6% compared to the previous year, even though consumer confidence fell sharply during the month.
“However, business surveys suggest that the manufacturing, services and construction sectors all slowed sharply in July, and, if sustained, this is likely to have a negative impact on the labour market and household confidence.
“Most forecasters, including the Bank of England, expect the economy to show little growth over the remainder of the year. Indeed, these concerns prompted the Bank’s Monetary Policy Committee (MPC) to implement a range of stimulus measures at the start of August, which will provide support to economic activity and the housing market.
“The creation of the new Term Funding Scheme is also important, as it means that lenders will have guaranteed access to low cost funding from the Bank of England, which should help ensure the supply of credit is maintained.”
It seems that, while the Brexit vote hasn’t conjoured immediate financial Armageddon, nothing is as safe as houses yet.