According to the latest data and analysis from Halifax, house prices in the three months to August were 2.6% higher than in the same three months a year earlier.
The annual rate in August is higher than in July (2.1%), however it has fallen from a peak of 10.0% in March 2016 when transactions grew sharply ahead of the introduction of new higher stamp duty tax rates for buy to let and second homes that came into effect in April.
House prices rose by 1.1% between July and August, following a 0.7% increase in July.
Russell Galley, Managing Director, Halifax Community Bank, said: “The annual rate of growth increased from 2.1% in July to 2.6% in August with the average house price now £222,293, which is just above the previous high of December 2016 (£222,190).
Recent figures for mortgage approvals suggest some buoyancy may be returning, possibly on the back of strong recent employment growth, with the unemployment rate falling to a 42 year low. However, wage growth is still lagging increases in consumer prices, which is likely to add pressure on household finances and increase affordability challenges for some buyers.
House prices should continue to be supported by low mortgage rates and a continuing shortage of properties for sale over the coming months.”
Russell Quirk, founder and CEO of eMoov.co.uk, commented: “Rather than returning from the holiday period sunburnt and bleary-eyed, the UK housing market has defied the usual slower summer trends to show strong price growth on a monthly and annual basis.
Although the same can’t be said for wage growth, mortgage rates still remain low and this, coupled with the ongoing shortage of stock and high volume of sales, should see UK house prices continue this upward trajectory heading towards Christmas.
This initial increase puts the market in good stead despite a rough ride over the last year and we should now see some degree of normality return as we see out 2017.”
Jonathan Samuels, CEO of the property lender, Octane Capital, said: “With supply so low, sentiment holding firm given the strength of the jobs market and stupendously competitive mortgage rates, it’s no surprise the property market is hanging in there.
For every negative, such as stubbornly high inflation, low wage growth and political uncertainty, there is a positive, and that’s balancing things out. Even though the Halifax data demonstrates an underlying resilience in prices and the market, it’s unlikely to be the beginning of a material bounce-back.
The property market is still a shadow of its former self and we are likely to remain in a sideways-moving market while various macro-economic and political factors play out. There’s every chance we’ll have much of the same for the rest of the year and into 2018.
Arguably the major threat is the impact of higher inflation and low wage growth on household confidence and budgets. If people increasingly feel the squeeze, a growing number of property transactions will invariably go on the back burner.”
Jeff Knight, Director of Marketing at Foundation Home Loans, commented: “The market certainly hasn’t been helped by ongoing political uncertainty, particularly around the Brexit negotiations, but core demand for properties is nudging prices up. Continued growth will be good news for some homeowners, but may hinder a move up the ladder for others. It will also increase deposit sizes for first-time buyers, who are seeing deposits eroded with more challenging inflation versus low deposit rates.
Housing supply remains the top priority to address with even greater commitments to housebuilding, something that will not only help to keep prices under control, but also significantly improve the choice available in the rented sector for tenants.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Before we get too carried away by the numbers it is worth remembering that house-price growth is being underpinned by a shortage of supply, including housebuilding, historically low mortgage rates and relatively low unemployment, rather than strong buyer demand. Fewer transactions are taking place where affordability has been most stretched due to lack of new and existing stock, such as in London – and inflation higher than wage growth.
The short-term impact of Brexit on the housing market was probably overestimated but the longer term effects may have been underestimated. However, now that the government is negotiating the UK’s exit from the EU, further uncertainty seems inevitable until the final outcome becomes clearer.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Swap rates have remained pretty flat since the end of July and with many economists not expecting interest rates to rise until 2019 despite inflation remaining above target, the cheap mortgage rates that borrowers have been enjoying are unlikely to disappear any time soon.
As we head into the autumn which is traditionally a busier time of year for the market as people return from their holidays with renewed vigour to get things done and move by Christmas, there are plenty of attractive mortgage deals to tempt them.”
Alex Michelin, Co-founder of CapitalRise, comments: “Aspiring home-owners shouldn’t see today’s increase in UK house prices as bad news, but view it as an opportunity. House price growth has slowed below the rate of inflation, which is good for would-be home buyers as it means homes are becoming more affordable.
The fact that there is still a rise in prices demonstrates the resilience of the property market in the UK, despite all the negative headlines about Brexit. While the stock and bond markets appear overvalued and vulnerable to political events and economic uncertainties, property in the UK remains strong and a great place for investors to place their money.
The property market offers a strong, stable and tangible asset, and with areas like Kensington, Chelsea and Westminster in London remaining Britain’s most expensive postcodes, these are prime areas to invest in. Overall, our confidence in UK property investment remains high, with our team of experts continuing, to invest their personal money in British prime real estate.”