House prices in UK picked up marginally in July, lender index shows

House prices in the UK picked up modestly in July with values up 0.6% month on month to an average of £217,010, but annual growth at 2.5% has barely moved, the latest index figures show.

Robert Gardner, Nationwide’s chief economist, pointed out that annual house price growth remains within the fairly narrow range of 2% to 3% which has prevailed over the past 12 months, suggesting little change in the balance between demand and supply in the market.

‘Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year,’ he said.

He added that borrowing costs are likely to remain low and overall the lender continues to expect house prices to rise by around 1% over the course of 2018.

According to Jeff Knight, marketing director for Foundation Home Loans, the lagging supply of new builds failing to meet ongoing demand risks putting a real dampener on housing market activity.

‘With first time buyers unable to, or choosing not to, get a foot on the property ladder and second steppers unable or choosing to wait, affordability and the range of properties available are the more pressing issues, for both home owners and renters alike,’ he added.

Kevin Roberts, director of the Legal & General Mortgage Club, also believes that affordability is an issue. ‘Whilst house price inflation may be more sustainable, today’s millennials still need to find up to 13 times their annual salary to get onto the property ladder in London. Help to Buy, Shared Ownership and family support through the Bank of Mum and Dad are undoubtedly increasing chances, but this alone is not enough,’ he explained.

‘The Government has already shown a commitment deliver on the thousands of new houses and flats the country needs, we just need to see action on that promise if future generations are to have the best chance of taking their first step,’ he said.

However, Jonathan Hopper, managing director of Garrington Property Finders, pointed out that the national figure hides regional differences and Nationwide’s annual rate of price growth has barely shifted from where it was a year ago.

‘It’s tempting to see such a meandering market as the fruit of a cautious consensus. Instead it’s a by product of the collision of pent-up demand, low supply and patchy confidence. With activity levels slowly picking up, the rising tension is creating some big regional anomalies making the national average as misleading as it is insipid,’ he said.

He believes that the forces holding back the market will get steadily stronger if the UK leaves the European Union without a Brexit deal. ‘The top end of the market could slip into full retreat as investment buyers go into lockdown. For everyone else, softening prices and better affordability will create buying opportunities, particularly for the bold and strategic, in what will become an increasingly fractured market,’ he explained.

‘Two years of economic and political uncertainty have done little to repair what the government calls Britain’s broken property market. If the traditionally busy back to school months ahead fail to deliver greater confidence, the shattered pieces of the market will drift further apart,’ he warned.