House price growth regained momentum in June, rising by 1.1%, according to the latest House Price Index from Nationwide.
June’s monthly increase reversed the previous three months’ declines.
Annual house price growth also rose over the month, from 2.1% to 3.1%.
The average house price in the UK stood at £211,301 in June, up from £208,711 in May.
Nationwide has also released its quarterly House Price Index, revealing that the gap in house price growth between the strongest and weakest performing regions in the second quarter (Q2) of the year is the smallest on record.
Q2 saw further convergence in regional house price growth. The gap between the weakest and strongest regions (in terms of annual price change) dropped to just four percentage points – a record low.
East Anglia was the strongest performing region in Q2, with average prices up by 5% year-on-year. London saw a notable slowing in growth, to 1.2%, and was the second weakest region in Q2, just above the north, at 1.1%.
Annual house price growth in Northern Ireland was stable, at 3.8%. Scotland experienced a slight softening in growth, to 1.7%, while Wales recorded similar levels to the previous quarter, at 1.4%.
House Price Growth Regained Momentum in June, Reports Nationwide
Average house prices in England fell by 0.3% during Q2, but were up by 2.8% over the last 12 months.
For the first time in eight years, house price growth in northern England (the West Midlands, East Midlands, Yorkshire and the Humber, the North West, and the north) exceeded that of southern England (the South West, outer South East, outer Metropolitan, London, and East Anglia). Northern England recorded a 3.3% annual rise, while prices were up by just 2.6% in the south.
Regional growth rates may have converged, but Nationwide continues to report significant disparities in price levels. This is particularly apparent when looking at prices relative to their 2007 peaks.
For example, prices in London are around 55% above their 2007 levels, while those in the north, Yorkshire and the Humber, and the North West are still below 2007 levels.
The Chief Economist at Nationwide, Robert Gardner, comments on the latest figures: “UK house prices rebounded in June, with prices rising by 1.1% during the month, erasing the decline recorded over the previous three months. However, monthly growth rates can be volatile, even after accounting for seasonal effects.
“The annual rate of house price growth, which gives a better sense of the underlying trend, continues to point to modest price gains. Annual house price growth edged up to 3.1% from 2.1% in May. In effect, after two sluggish months, annual price growth has returned to the 3-6% range that had been prevailing since early 2015.”
He continues: “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 (East Anglia, which saw 5% annual growth) and the weakest (the north, with 1% growth) was the smallest on record, based on data going back to 1974. Nevertheless, when viewed in levels, the price gap between regions remains extremely wide.
“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.”
Gardener explains: “The emerging squeeze on household incomes appears to be exerting a drag on housing market activity in recent months. The number of mortgages approved for house purchase has slowed a little in recent months and surveyors report that new buyer enquiries have softened.
“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. 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 looks ahead: “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. 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.”
Hannah Maundrell, the Editor in Chief of money.co.uk, also responds to the data: “Looking at month-on-month changes to the housing market without factoring in annual performance can give us an unrealistic picture, because it’s partly reliant on which properties sold during the month. This could explain the turnaround Nationwide’s price index shows.
“The devil is in the detail however, and there are signs the property market is cooling slightly, 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 adds: “If you’re looking to buy, the power is tipping in your balance, so make sure you do your research and haggle to get a price you’re happy with. If you’re selling, make sure the price you’re asking is realistic and be confident about the minimum you’re able to accept. If you want to sell at the top end of the price scale, you’ll need to make sure your home is better than anything else out there, and be prepared to wait for someone that wants to pay a premium.”