House prices rise despite Brexit and political uncertainty

UK house prices have increased by 1.1% month on month in June, indicating that Brexit and a hung Parliament are not dampening the residential property market.

The latest house price index from Nationwide shows that June’s monthly rise effectively reverses the decline recorded over the previous three months.  The report also shows that house prices have increased by 3.1% year on year, bringing the average price of a home to £211,301.

Nationwide’s chief economist, Robert Gardner, explained the growth in the South of England as moderated, converging with the rates prevailing in the rest of the country.

The data shows that in the second quarter the gap regions ranged from 5% in the strongest performing region of East Anglia to 1% in weakest performing region, the North of England.  London recorded the second slowest pace, for annual price growth, in the UK and the weakest pace of growth in the capital since 2012.

Robert Gardener commented saying: “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 more the important factor”.

He added: “while survey data suggests that new buyer enquires 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”.

Gardener points out that the uncertainty around the UK’s trading arrangements, as a result of Brexit,  has meant the economic outlook remains uncertain with housing market trends depending on the development of 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, commented that house prices are continuing to rise above inflation.  He said: “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”.

Duncombe added: “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”.

Jonathan Hopper, managing director of Garrington Property Finders, believes it is good news that growth is now spread more evenly across the UK.  He explains that: “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”.

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