UK property prices continue to grow, up 1.3% in August, official data shows
Property prices in the UK increased by 1.3% in August and are up 8.4% compared to a year ago, taking the average price to £218,964, the latest index shows.
The figures from the Office of National Statistics (ONS) also show that prices increased across most of the country with only Wales and the North East seeing prices fall, by 0.6% and 0.2% respectively.
The biggest increase in home prices was in Northern Ireland with a month on month rise of 3.8%, followed by 2.3% in the South West and 1.9% in the South East.
Year on year the biggest price rise was in 13.3% in the East of England, followed by 12.2% in the South East and 12.1% in London, suggesting that a north/south divide still exists in the country as a whole.
Also, year on year prices are up across the country with the smallest annual growth in Wales at 2.7%, followed by the North East at 3% and Scotland at 4.3%, further reinforcing the divide in terms of prices.
However, sales are down across the nation. Between June 2015 and June 2016, the most up to date figures available, sales fell by 32.2% in England, by 27.1% in Wales, by 21.6% in Northern Ireland and by 7.4% in Scotland.
‘Housing market indicators for August suggested a period of relative stability during the month. Although demand and supply was broadly unchanged compared to the previous month, the indicators remained somewhat weaker than in 2015 and early 2016,’ the index report says.
‘In terms of housing demand, the volume of lending approvals for house purchases fell slightly in August compared to July, remaining at levels seen in early 2015. Home sales in the UK stayed stable between July and August but remain below levels seen in 2014, 2015 and before the stamp duty changes in early 2016,’ it adds.
The index figures are another confirmation that Brexit has not had the predicted effect on the UK housing market, according to property experts. But the market could still cool, according to Thomas Fisher, economist at PwC, who believes that slower economic growth will have an impact in 2017.
‘There is no sign yet that the Brexit vote is dampening the UK housing market as a whole, even if the central London market has slowed. The August figures represent the 19th consecutive month of house prices increases compared to the month before with the last monthly price drop occurring back in January 2015,’ he explained.
‘House prices have been rising fastest in England, but are higher across all regions compared to a year ago. However, at a more local level, some areas of central London are experiencing weaker growth following the EU referendum vote. House prices in Camden, Kensington and Chelsea and Hammersmith and Fulham have all grown less than 2% over the past year compared to 12.1% for London as a whole,’ he said.
‘We project that average UK house price growth for 2016 will be over 5%, but will cool to around 1% in 2017 in response to slower expected economic growth next year,’ he added.
The housing market has proved its resilience despite ongoing fears around Brexit, according to John Goodall, chief executive officer of peer to peer platform Landbay. ‘The decision to slash interest rates at the beginning of August boosted mortgage lending and with another cut expected in the coming months we could see a further uptick in prices, as buyers take advantage of the lowest borrowing costs we’ve ever seen,’ he said.
However, he warned that the UK is still in the midst of a critical housing shortage. ‘A cocktail of fewer homes for sale, insufficient house building and a growing pool of aspiring home buyers mean that the market will remain inflated and inaccessible for many. Now more than ever, the private rented sector will be relied upon to support those unwilling or unable to buy a house outright. Indeed, the number of people newly renting will soon overtake those buying a property for the first time in 70 years, a trend that shows little sign of changing,’ he added.
Ishaan Malhi, chief executive officer of online mortgage adviser Trussle, also believes that it is a shortage of supply that is propping up the property market. ‘A shortage of supply remains the core reason for the continued growth in prices, but the small upturn in August could also be down to a surge in demand following August’s interest rate cut,’ he said.
‘For those with a deposit saved, buying a home has become that little bit more affordable through cheaper mortgage rates, but it’s crucial that people do their due diligence and choose a lender that’s passing on the full benefit of the rate cut to its borrowers,’ he pointed out.
However, strong price growth should not be confused with a property market in full health, according to Jonathan Hopper, managing director of Garrington Property Finders. ‘Prices are being supported by a combination of robust consumer confidence, record low interest rates and a chronic shortage of homes for sale,’ he said.
‘After so many bullish years, some have come to regard buyer confidence and low interest rates as immutable. But there’s nothing inevitable about either and today’s dramatic increase in consumer inflation could begin to erode both. The stoicism of sellers and lack of supply are propping up prices to a degree, but in many areas it has become a buyer’s market, with the boldest asking for substantial discounts in return for the certainty of a sale,’ he explained.
‘With the prices of super prime property falling sharply, we’re also seeing a surge in demand from foreign buyers. Sterling is now at its lowest level against the Dollar for three decades, prompting increasing numbers of astute overseas buyers to pounce,’ he added.