The latest figures extracted from Nationwide’s house price index have shown that in June annual house price growth increased to 5.1% – a slight improvement on the 4.7% seen during May.
Robert Gardner, Nationwide’s Chief Economist, said: “It has become difficult to gauge the underlying pace of demand in recent months, due to the surge in house purchase activity in March ahead of the introduction of Stamp Duty on second homes.
It will therefore be difficult to assess how much of the likely fall back in transactions in the quarters ahead is because buyers brought forward purchases to avoid additional Stamp Duty liabilities, and how much is due to increased economic uncertainty following the referendum result. Gauging the likely impact on house prices will be even more difficult.
Gardner added that it is too early to assess the impact of the referendum vote on the economy, “however, it is encouraging that the labour market had remained robust in recent months, with solid employment growth and the unemployment rate declining to an eleven-year low in April”.
They show that the market is more resilient than we might have expected. It shows that make-up of buyer interest was a mixture of investors who brought forward buying decisions as well as first-time buyers and existing home movers. The latter groups still see some value in the market and are taking advantage of very low interest rates.”
Ian Thomas, co-founder and director of LendInvest, had this to say: “The vote to leave has come as a shock to many, but in our view, the fundamentals of the UK housing market won’t change abruptly – people still need homes to live in, whether we are in the EU or not, and the fact is that demand for housing massively outstrips supply.Brexit may create opportunities too. It could result in the housing market cooling and resetting in areas where house price growth has locked out first-time buyers and others that want to purchase property.”
Jonathan Hopper, managing director of Garrington Property Finders, suggested that the 5.1% rate of average annual price growth is likely to be the high water mark for the property market for some time to come: “Nationwide’s June data gives a snapshot of the housing market immediately before the Brexit referendum. It shows a functioning market with decent price growth but limited supply – a languid calm before the storm.
Unfortunately this data is about as much use in predicting the future course of the property market as sun-dappled photos of the summer of 1914. It’s a historical record of a lost age before Europe changed forever. The referendum result has since plunged the property market into a ‘hard reset’, especially in the higher price brackets.
Outside London the impact will be less dramatic, but the uncertainty will do little to unblock the supply shortage. Would-be sellers will be more likely to stay put, and this tightening of supply may prop up prices to a degree. All this points to a soft landing rather than a crash, but the uncertainty is such that normal rules have been suspended.”
