UK property prices up in August despite Brexit worries

Taylor Scott International News

House prices in the UK increased by 0.6% in August and are now 5.6% above a year ago, according to the latest index figures to be published. This continued growth takes the average price of a home to £206,145, the data from the Nationwide shows, indicating that an expected fall due to Brexit has not yet materialised. The pick up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months, according to Robert Gardner, Nationwide's chief economist, saying that this includes a softening of new buyer enquiries to the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum. Meanwhile, the number of mortgages approved for house purchase fell to an 18 month low in July. ‘However, the decline in demand appears to have been matched by weakness on the supply side of the market. Surveyors report that instructions to sell have also declined and the stock of properties on the market remains close to 30 year lows,’ Gardner explained. ‘This helps to explain why the pace of house price growth has remained broadly stable. What happens next on the demand side will be determined, to a large extent, by the outlook for the labour market and confidence amongst prospective buyers,’ he pointed out. He believes that it is encouraging that the unemployment rate remained at a 10 year low in the three months to June, though labour market trends tend to lag developments in the wider economy and it is also positive that retail sales increased at a healthy rate in July, up almost 6% compared to the previous year, even though consumer confidence fell sharply during the month. ‘However, business surveys suggest that the manufacturing, services and construction sectors all slowed sharply in July, and, if sustained, this is likely to have a negative impact on the labour market and household confidence,’ he said. ‘Most forecasters, including the Bank of England, expect the economy to show little growth over the remainder of the year. Indeed, these concerns prompted the Bank’s Monetary Policy Committee (MPC) to implement a range of stimulus measures at the start of August, which will provide support to economic activity and the housing market. Monetary policy measures will provide some support for households and the housing market,’ Gardner commented. ‘The MPC’s decision to lower UK interest rates from 0.5% to a new low of 0.25% will provide an immediate benefit to many mortgage borrowers, though for most the boost will be fairly modest. The MPC’s stimulus measures will also provide indirect support to the housing market, and not just by boosting wider economic activity,’ he added. According to Nicholas Finn, executive director of Garrington Property Finders, the data reveals a property market that is still unsettled rather than upbeat. ‘On the front line we’re seeing some strong intent but a lack of clarity among buyers. The cut in interest rates and resilient… Taylor Scott International

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