House prices in the UK increased by 1.1% month on month in June, suggesting that Brexit and a hung Parliament are not dampening the residential property market.
The latest index from lender, the Nationwide, shows that the monthly rise effectively erases the decline recorded over the previous three months. Year on year prices are up 3.1%, taking the average price of a home to £211,301.
The data also shows that the gap in house price growth between the strongest and weakest performing regions in the second quarter of the year was the smallest on record.
Robert Gardner, Nationwide’s chief economist, explained that price growth in the South of England has moderated, converging with the rates prevailing in the rest of the country. In the second quarter the gap ranged from 5% in strongest performing region of East Anglia to 1% in the North of England, the weakest region.
London saw a particularly marked slowdown, with annual price growth moderating to just 1.2%, the second slowest pace of the 13 UK regions and the weakest pace of growth in the capital since 2012.
‘At this point it is unclear whether the increase in house price growth in June reflects strengthening demand conditions on the back of healthy gains in employment and continued low mortgage rates, or whether the lack of homes on the market is the more important factor,’ Gardner said.
‘While survey data suggests that new buyer enquiries have softened, it also indicates that this has been matched by a decline in new instructions. Indeed, the number of properties on estate agents’ books remains close to all-time lows,’ he added.
He pointed out that given the ongoing uncertainties around the UK’s future trading arrangements due to Brexit, the economic outlook remains unusually uncertain, and housing market trends will depend crucially on developments in the wider economy.
‘Nevertheless, in our view, household spending is likely to slow in the quarters ahead, along with the wider economy, as rising inflation squeezes household budgets. This, together with ongoing housing affordability pressures in key parts of the country, is likely to exert a drag on housing market activity and house price growth in the quarters ahead,’ Gardner explained.
‘However, the subdued level of building activity and the shortage of properties on the market are likely to provide support for prices. As a result, we continue to believe that a small increase in house prices of around 2% is likely over the course of 2017 as a whole,’ he concluded.
Jeremy Duncombe, director of the Legal & General Mortgage Club, pointed out that house prices continue to rise above inflation. ‘Whilst demonstrating the market’s resilience in the face of political uncertainty, this will be sobering news for many first time buyers who are struggling to make their first step onto the ladder,’ he said.
‘For a healthier market, what we need to see is property prices rising in line with inflation. More affordable housing needs to be built to allow all those who wish to do so, a better chance of achieving homeownership. More than that, however, we also need to see incentives for home movers and last time buyers looking to downsize, so that we can get our housing market on the move,’ he added.
Hannah Maundrell, editor in Chief of money.co.uk, believes that there are signs that the property market is cooling with fewer people putting their property for sale, and a drop in the number of people looking to buy. ‘This is no great surprise, with the election thrusting us deeper into uncertainty it’s sensible to be cautious,’ she said.
According to Alex Gosling, chief executive officer of online estate agents HouseSimple, buy to let changes have really hit the London market. ‘Areas that relied on a steady flow of buy to let investors now have a void they are struggling to fill. Although it’s good news for first time buyers, there aren’t enough of them to go around,’ he said.
‘Buy to let investors who are making offers are factoring in the extra stamp duty hit on second homes and offering well below asking price. Many sellers aren’t willing to knock 10% to 15% off the asking price to sell to an investor, and seem happy to wait for the right buyer, rather than taking the hit for a quick sale,’ he pointed out.
Jonathan Hopper, managing director of Garrington Property Finders, believes it is good news that growth is now spread much more evenly across the country, with the market fragmenting into a patchwork of smaller hot spots and cold spots.
‘Some regions are seeing intense competition from buyers and the return of gazumping, while in parts of the capital prices are sliding steadily, giving astute buyers an opportunity to secure real bargains. ‘But while the return to a respectable headline growth rate is welcome, it’s more likely to be the product of the chronic lack of supply rather than any acceleration in demand,’ he explained.