Relocate MagazineUK property prices bounce back to new high
House prices in the UK recorded their strongest monthly growth for more than two years in June, according to the latest index from the Nationwide Building Society.
Average house prices across the UK at a record high
After recording declines in each of the previous three months, Nationwide said June saw a 1.1 per cent, month-on-month rise, the highest since April 2015, bringing the average price across the UK to a new record of £211,301.
On an annual basis, prices are now increasing at an average of 3.1 per cent, although there are marked differences between different parts of the country.
While prices in East Anglia increased by five per cent year-on-year, 4.5 per cent in SW England, and 4.4 per cent in both the East Midlands and NW England, the annual rise was only 1.1 per cent in NE England, 1.2 per cent in London and 1.4 per cent in Wales. Growth was 1.7 per cent in Scotland and 3.8 per cent in Northern Ireland.
A shift in regional house price trends
Robert Gardner, chief economist at Nationwide, said, “There has been a shift in regional house price trends. Price growth in the South of England has moderated, converging with the rates prevailing in the rest of the country.
“In Q2, the gap between the strongest performing region and the weakest was the smallest on record, based on data going back to 1974.
“London saw a particularly marked slowdown, with annual price growth moderating to just 1.2 per cent – the second slowest pace of the 13 UK regions and the weakest pace of growth in the capital since 2012.”
Jonathan Hopper, managing director of Garrington Property Finders, commented, “For London's house prices to be growing at the second slowest rate in the country would have been unthinkable for much of the past decade.
“Instead, growth is now spread much more evenly across the country, with the market fragmenting into a patchwork of smaller hotspots and cold spots.”
The house price index is likely to remain volatile
Mr Gardner warned that the index could be volatile over the coming months and that a growing squeeze on household incomes amid rising inflation appeared to be “exerting a drag on housing market activity in recent months”.
He added, “Given the ongoing uncertainties around the UK's future trading arrangements, 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.
“However, the subdued level of building activity and the shortage of properties on the market are likely to provide support for prices.”
Jeremy Leaf, north London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors, said, “These figures are a little surprising when you consider some of the mixed messages that we have been receiving from the housing market over the past few months. But they do demonstrate that activity is happening where buyers and sellers are prepared to be realistic and take advantage of the low mortgage rates available.
“Last month, Nationwide reported that house prices rose at their slowest rate in almost four years so this is a welcome change but does underline the dangers of looking at one month’s figures in isolation as the market can be quite volatile.”
London property prices will bounce back
Lucy Pendleton, director of estate agents James Pendleton, added, “The housing market has come up for air, which is incredible in a month that saw one of the least conclusive general elections ever.
“If Theresa May’s disastrous election gamble was the first shock result, then the performance put in by the housing market in London has to be the second.
“London had a bad day in the office in June but it always bounces back. Thanks to its stellar performance stretching back years, we’ve been confidently relying on London to shrug off any slowdown seen nationwide but the tables have turned, if only briefly. If this trend continues in July then that is going to turn some heads.
“For the market to bounce slightly across the country as a whole in such adverse conditions says something about the way solid demand and weak supply are cushioning the market.
“However, it may be short-lived. A gentle slide in prices could continue but it’s got less to do with Brexit and more to do with four factors that can be the Four Horsemen of the Apocalypse for markets – inflation, consumer credit, wage growth and mortgage activity – all of which have been dragging their heels recently.”
By David Sapsted, 28 June 2017