UK prices creeping up again as lack of supply and low interest rates keep things going
House prices in the UK in the three months to the end of August were 0.1% higher than in the previous three months, the first time they have increased over a three month period since March.
The latest index from lender the Halifax also shows that prices over the three month period were 2.7% higher than in July but this measure of price growth is still much lower than the peak of 10% in March 2016.
The data also shows that month on month prices increased by 1.1% to an average of £222,293 and year on year prices are 2.6% higher and the index report says that lack of supply and low interest rates will continue to support property prices.
‘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,’ said Russell Galley, managing director of Halifax Community Bank.
‘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,’ he added.
Alex Gosling, chief executive officer of online estate agents HouseSimple, pointed out that it is the first month this year that average price growth has exceeded 1% and he believes that it sets the housing market up nicely for a strong end to the year.
‘Although price growth might be slightly skewed by the fact July and August are traditionally quieter months for mortgage approvals, it still doesn’t take away from the fact that house prices have responded positively after a torrid few months of political battering,’ he said.
‘We are now about to enter a critical time for the market though and September could make or break the market. Property supply still remains critically low and although it has helped to prop up house prices, it’s not a healthy position in the longer term. We need this renewed optimism to translate into sales, and that means we need to see more properties being listed,’ he added.
It is a sign that the property market is proving to be resilient, according to Graham Davidson, managing director of buy to let specialist Sequre Property Investment. ‘Whilst landlords have experienced a fair few obstacles, the marketplace is continuing to deliver very healthy returns indeed, this is due to stock shortages and an incredibly high tenant demand. I expect we’ll continue to see further growth towards the end of the year,’ he explained.
However, Jonathan Hopper, managing director of Garrington Property Finders, warned that price rises are being driven by equilibrium rather than energy. ‘The chronic shortage of supply has placed a floor under prices, while demand has been underpinned by a combination of benign interest rates and a robust jobs market,’ he said.
‘Buyer sentiment in many areas remains upbeat, even if few are rushing and most won’t hesitate to walk away from a property being offered at anything other than a highly competitive price. The result of this stand-off has been a gradual softening of prices rather than a correction,’ he pointed out.
‘The market remains deeply fragile, but the listless limbo that followed the election result is fading as increasing numbers of previously hesitant buyers are piqued into action by the sense that stability, if not quite normality, is returning,’ he added.
Ewen Bunting, head of sales at independent estate agents James Pendleton, is concerned about supply issues. ‘Nationally we’re now facing a year and a half straight of falling instructions. There just hasn’t been enough choice out there, and among those who simply need to buy and have the means, there’s no option but to meet seller demands,’ he said.
‘In London although we’re seeing positive signs of supply rising, bucking the national trend in a market that often acts as a bellwether for the country as a whole. If prices are to cool later this year amid a squeeze on spending and a possible rise in interest rates, it would be better this is driven by increased supply than a collapse in buyer confidence at prices that have risen relatively sharply in many areas including London and the South East in recent years,’ he added.
But Mark Weedon, head of institutional investment at Property Partner, said it is positive that the index has recorded the first quarterly increase in house prices for five months. ‘Although the quarterly growth is a modest 0.1%, month on month figures are more promising at 1.1%, giving potential for 2017 to be a stronger year for growth than had been previously expected,’ he pointed out.
‘There is however no escaping the fact that prices are being supported by a shortage of available housing stock, despite demand remaining fairly stable. The 17th straight month of declining sales instructions suggests this won’t be rectified in the foreseeable future,’ he cautioned.
Source: www.propertywire.com
