24 Sep Slight Pickup in House Price Growth in August
The arrival of August doesn’t usually bring bright prospects for the housing market, with buyers and agents alike packing their bags for their yearly holidays, and families pre-occupied with summer activities. This year, however, saw an unexpected growth in housing prices.
A 0.6% rise in prices since July was a welcome sight to many, being an even bigger increase than the previous months’ of 0.5%. This brought the average housing price from £205,715 in July to £206,145 in August. This, compared to last year’s average of £195,279 in the same month, is a hopeful sight that the market is moving steadily in the right direction.
However, this increase is contradictory to reports of a slowing of pace within the housing market over the past few months.
Nationwide’s Chief Economist, Robert Gardner, claimed that ‘New buyer enquiries have softened’ due to the after-effects of the EU referendum, and also the additional stamp duty put in place in August. This is the fourth consecutive month that there have been reports of falls in new buyer enquiries.
This may appear confusing; why would house prices be rising if the market is slowing? Gardner goes on to explain that there may be a link between supply and demand.
‘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 thirty-year lows. This helps to explain why the pace of house price growth has remained broadly stable.’
Whilst the initial appearance of August’s flourishing housing market may be a sign of good things to come, it’s clear that it’s not as simple as that. The market balances precariously on a knife edge, dependant on a number of factors to keep it steady.
On the positive side, unemployment rates are still staying relatively low in comparison to recent years, and retail sales are thriving, increasing on the year before by 6% in July. These are factors that show a somewhat recovering economy and hint at a good future for the housing market.
On the other hand, July also saw a slow in the construction, services and manufacturing sectors. This is likely to hit hard on the labour market and household confidence if it continues, which could be a blow to the housing market.
The overall growth of the economy is expected to be very little throughout the remainder of the year, which again would not be hugely beneficial to the housing market. Due to this, the Bank of England’s Monetary Policy Committee (MPC) began an attempt to support the economy and housing prices at the beginning of August.
‘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,’ Gardener goes on to explain.
Though for many the benefit of this lowered rate will be small, it will certainly help to stabilise the position of both the economy and housing market.