Weak supply supports modest house price growth

HOUSE prices are once again showing modest signs of growth following months of decline earlier in the year.

Nationwide Building Society’s latest house price index shows prices were up 0.3pc month on month in July, lower than in June when prices were up 1.1pc, but higher than between March and May when prices fell.

Annual house price growth stood at 2.9pc in July, a touch lower than the 3.1pc recorded in June, with the average UK house price now £211,671 – a new record for Nationwide’s index.

Robert Gardner, Nationwide’s chief economist, said: “The annual pace of house price growth remained broadly stable in July … On the surface, this appears at odds with recent signs of cooling in the housing market.”

The number of housing transactions dipped to its lowest level for eight months in June, while in the same month the number of mortgages approved for house purchase moderated to a nine-month low of around 65,000.

“But a lack of homes on the market appears to be providing support, with annual house price growth remaining only just outside the 3pc to 6pc range that has been prevailing for most of the past two years. This pattern looks set to be maintained in the near term,” Mr Gardner added. “While employment growth has remained relatively robust, household budgets are coming under pressure as wage growth is failing to keep up with the rising cost of living. This suggests that housing market activity is likely to remain subdued.”

Nevertheless, constrained supply providing extra support for house prices should mean they will rise by around 2pc over 2017 as a whole, Nationwide predicted.

Jeremy Leaf, a north London estate agent and a former Rics residential chairman, said that although these figures on the face of it “look quite encouraging when one considers the fall in transactions, it is clear that prices are being supported by a lack of property on the market”. He said: “We would have expected transactions, in particular, to be higher compared with last year, bearing in mind how much quieter the market was 12 months ago following the introduction of the stamp duty surcharge.”