UK sees strong month on month price growth, latest index shows

Residential property prices in the UK increased by 2.7% between July and August and are up 9% compared with a year ago, according to the latest index figures from the Halifax.  

The data from the lender also shows that on a quarterly basis, from June to August, prices were 3% higher than in the previous three month period.

It is the biggest monthly price rise since May 2014 when it was 3.8% but the index report points out that monthly movements can be volatile and the quarter on quarter change is a more reliable indicator of the underlying trend.

The index report also shows that buying still cheaper than renting. The average monthly costs associated with buying a three bedroom house in the UK for a first time buyer was £666 in June 2015, some 8% or £56 lower than the typical monthly rent paid on the same property type at £722 a month.

With the price of a typical first time buyer home rising by 8% over the past year, the difference between the cost of owning and the cost of renting has narrowed from £85 to £56 over the past year.

'The underlying pace of house price growth is strong. The shortage of second hand properties for sale on the market is resulting in upward pressure on house prices,' said Martin Ellis, Halifax housing economist.

'At the same time, economic recovery, real earnings growth and very low mortgage rates are supporting housing demand. Strengthening demand and highly constrained supply are likely to mean that house price growth continues to be robust in the short term,' he added.

However, according to Rob Weaver, director of property at residential investment platform Property Partner, for many people, weak supply and the resultant price growth have become an almost insurmountable barrier to getting on the property ladder.
'With supply so low, consumer confidence healthy and mortgage rates still at record lows, strong price growth is a trend that can only continue in the months ahead. If prices carrying on rising at this rate, even many haves will become property have nots,' he said.
'House price growth in August hit its highest level in 16 months, as the number of homes being marketed fell to record low levels. Sellers are just not coming to the market and no-one really has an answer to how to tempt them back,' he explained.

'We are in danger of seeing the days of free wheeling price growth, and we know where that ended up. There needs to be a focus on creating more supply, because without properties coming to the market, prices will continue to grow and the market will continue to become more and more volatile,' he added.

Jonathan Hopper, managing director of the buying agents Garrington Property Finders, believes that price growth is being driven by a curious mixture of strength and starvation. 'Britain's economic strengths of wage growth, low inflation and bullish sentiment, are inspiring thousands of would be buyers that now is the time to act,' he said.

'But buyers are being starved of supply, not just of the new homes being built in insufficient numbers, but of existing stock too. That mismatch is creating a shortage of properties at all but the highest price points and steadily increasing prices is the inevitable result.Both new instructions and transaction levels are falling, so the property market's robust rate of price growth should not be confused with rude health,' he explained.

'Fortunately the market's fundamentals remain sound. The cost of borrowing has barely moved from its rock-bottom level, and Bank of England figures show that mortgage approvals in July rose to their highest level since February 2014. With the Help to Buy scheme increasingly being accused of stoking prices for first time buyers, but doing little to spur house building, lack of supply remains a systemic risk,' he added.

'But for all their enthusiasm, buyers remain astute and sellers must be wary of letting their pricing ambitions run away from what the market will tolerate. It is not a solely sellers' market,' he concluded.