UK’s annual house price growth rises to 3.1%

After a ‘sluggish’ two months, June marks a turnaround in the property market, with house prices rebounding by 1.1%, reports Nationwide Building Society.

What’s the latest?

The UK’s property market showed signs of picking up in June, with house prices rising by 1.1%.

The increase reversed the fall in property values recorded in the previous three months, to leave the average UK home costing £211,301.

Also, according to Nationwide Building Society, the annual rate of house price inflation rose, lifting to 3.1%, up from 2.1% in the 12 months to the end of May.

The strong rebound in price growth is at odds with other data on the property market, such as housing transactions and mortgage approvals, which have suggested activity still remains subdued.

Thus, Nationwide’s chief economist Robert Gardner cautioned against reading too much into one month’s figures, as these tend to be volatile, and he added that the annual rate continued to point to only modest price gains.

Gardner said: “In effect, after two sluggish months, annual price growth has returned to the 3-6% range that had been prevailing since early 2015.”

Why is this happening? 

Nationwide said it was unclear if the increase in house price growth in June reflected stronger demand or the lack of homes on the market.

While survey data suggests new buyer enquiries have softened, this trend has been matched by a fall in new instructions, leaving the number of properties for sale close to record lows.

Gardner said he expected the squeeze on real incomes and ongoing housing affordability pressures to exert a drag on both activity and house price growth in the quarters ahead.

But he added that subdued building levels and the lack of stock for sale should continue to support prices, which Nationwide expects will rise by 2% in 2017 as a whole.

Who does it affect?

Nationwide said there had been a shift in regional house price trends, with house price growth in the south east moderating to 3.5% to be closer to levels seen across the rest of the country.

London continues to see the sharpest slowdown, posting annual gains of just 1.2% in the second quarter, the second slowest rate for any region, and the lowest level for the capital since 2012.

East Anglia was the strongest performing region, with rises of 5%, while growth was weakest in the north at 1%, making the gap between the strongest and weakest regions the smallest since records began in 1974.

But the price gap between regions remains extremely high, with the average home in London costing £478,142, nearly four times the average of £125,237 paid for a property in the north.

Mark Harris, chief executive of mortgage broker SPF Private Clients, told Zoopla: “With prices in London spiralling out of control, and the market now entering a period of correction, buyers are looking outside the capital either for investment properties or to live and commute from.

“A city such as Birmingham is just over an hour away, for example, with people prepared to commute for that long if it means a more affordable property.

Sounds interesting. What’s the background?

Interestingly, the figures come as the National Association of Estate Agents released data showing 77% of homes sold for less than their asking price in May.

There was also a fall in demand, with the number of house hunters registered per branch dipping by 8% compared with April.

But on a brighter note, the number of homes on the market increased slightly to 40 per branch, while an average of 10 sales were agreed per estate agent up from just eight in April.

Source: Zoopla