House price growth remained at a steady 0.5% in July, according to the latest House Price Index from Nationwide. However, the data suggests that the future of the property market is uncertain following the Brexit.
In the first month’s data following June’s EU referendum, Nationwide reveals that monthly house price growth stands at 0.5%, compared to 0.2% in June, while annual inflation is virtually unchanged, at 5.2% from 5.1%.
The average house price in the UK is now £205,715, up from £204,968 in June.
House Price Growth Steady in July, but Future Uncertain
Although the figures could be used to determine the effects of the Brexit vote on the property market, the Chief Economist at Nationwide, Robert Gardner, explains that the data used in this report is from the mortgage offer stage. This means that any impact from the vote may not be fully evident yet, as there is a short lag between a buyer’s decision to purchase a property and applying for a mortgage.
In addition, the index states that a slowdown in activity was expected over the summer months, following a surge in property sales ahead of the 1st April Stamp Duty deadline for buy-to-let landlords and second homebuyers. It adds that it will be difficult to determine how much of the fall back in activity is the result of these tax changes and how much is due to the referendum.
Gardner also points out that the future of the property market looks unusually uncertain at this time.
“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. In the run up to the vote, the Royal Institution of Chartered Surveyors (RICS) reported declines in new buyer enquiries and expectations of weaker price growth amongst surveyors, though these trends pre-date the vote and are likely to have been impacted by the recent tax changes, as well as the referendum.”
He continues: “How the labour market evolves will be crucial in determining the demand for homes in the quarters ahead. It is encouraging that conditions were robust in the run up to the vote, with the unemployment rate falling to a ten-year low in the three months to May. The decline in long-term interest rates to new all-time lows in recent weeks should also help to keep borrowing costs low and provide some support for demand.
“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. The stock of homes on estate agents’ books is already close to its lowest levels for 30 years, and surveyors have reported a decline in new instructions to sell alongside a fall in buyer enquiries. Moreover, housebuilders may react to the uncertainty by delaying construction, even though home building is already failing to keep up with the natural increase in the population.”
Gardner concludes: “The outlook for the housing market remains unusually uncertain and it may take several months for the underlying trends in the market to become evident.”
The founder and CEO of eMoov.co.uk, Russell Quirk, also comments on the new data: “The first evidence of the post-apocalyptic Brexit property market and on the face of it, not a lot to worry about, with prices up 0.5% monthly and 5.2% annually.
“Yes, this isn’t a huge rate of growth, but prices are still continuing the upward trend enjoyed since 2012. That’s not to say there won’t be any impact, as the likes of Nationwide and Halifax usually report on somewhat of a lag, due to the use of mortgage offers data, not cold hard completions.
“This said, the UK property market is one of the strongest in the world and historically, house prices are higher than July 2014 and July 2015, so it’s looking pretty healthy across the board.”
He notes: “It’s important UK home sellers take any Brexit doomsayers and their forecasts with a pinch of salt and avoid acting irrationally where the sale of their home is concerned.
“We are entering a traditionally slower time for the property market, and so this cool in price rate growth is always likely to happen during the summer months. Once September rolls around again, we predict things will start to pick up and prices will continue their sharp ascent.”