House prices stable in July
Building society Nationwide has reported that house prices were stable in July, rising 0.5% month-on-month.
However it warned that the effect of the EU referendum on the housing market may take months to become clear.
Property prices rose by 0.5% in July and were up 5.2% on last year with the average home now being valued at £205,715.
Robert Gardner, Nationwide’s chief economist, said: “Any impact from the vote may not be fully evident in July’s figures, as there is a short lag between a buyer making the decision to purchase a property and applying for a mortgage.
“In the near term, increased economic uncertainty may lead to weaker demand for homes. Leading indicators are consistent with softening ahead. Household confidence fell sharply in the wake of the referendum result, especially attitudes towards making major purchases, which in the past has correlated with mortgage activity, though less closely in recent years.
“How the labour market evolves will be crucial in determining the demand for homes in the quarters ahead.”
Following stamp duty changes in April followed so quickly by the referendum it appears that it will be difficult to discern the cause of any impact on the market he warned.
“Even if there is a fall back in demand as a result of economic uncertainty, the impact on house prices is not certain, as potential sellers may also hold off from placing their properties on the market,” he said.
“The stock of homes on estate agents’ books is already close to its lowest levels for 30 years.”
Jeremy Duncombe, director, Legal & General Mortgage Club, added: “House prices are continuing their upward climb, and out-pacing wage inflation. Although some homeowners are viewing these increases in property value as a cause for celebration, especially given the uncertainty surrounding the EU referendum, these incessant rises are not welcome news for the wider market. In an ideal environment, house price increases would remain in line with the level of inflation, and not drastically outstrip it. The issue with having such a gulf between wage inflation and house prices is that property continues to become more unaffordable in real terms
“Cebr says that UK house price growth is set to continue outstripping inflation for the foreseeable future, despite the vote for Brexit. The feedback from lenders and brokers in the market is also largely optimistic. Despite sentiment remaining strong, what we really need to see is a concerted effort to increase housing supply across the UK. If the government and the industry work together to build more appropriate and affordable homes, we will start to see some real improvement in the market as a whole, more stable house price inflation, and an increase in the number of people able to buy their first home.”