ResidentialSep 7 2017

House price growth hits eight-month high

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House price growth hits eight-month high

UK house prices grew at their fastest rate in eight months during August as the demand for properties continued to outstrip supply, Halifax has reported.

The monthly growth rate climbed from 0.7 per cent in July to 1.1 per cent in August, taking the average price of a property to £222,293, according to Halifax’s latest house price index.

It was the highest month-on-month increase since December 2016, which saw growth of 1.6 per cent.

On a quarterly basis, prices rose for the first time since March, edging up by 0.1 per cent.

The annual rate of growth was up from 2.1 per cent in June to 2.6 per cent in August.

Russell Galley, managing director of Halifax Community Bank, said some buoyancy could be returning to the market on the back of strong recent employment growth, with the unemployment rate falling to a 42-year low. 

He said: “However, wage growth is still lagging increases in consumer prices, which is likely to add pressure on household finances and increase affordability challenges for some buyers.

“House prices should continue to be supported by low mortgage rates and a continuing shortage of properties for sale over the coming months.”

Figures from HM Revenue & Customs showed home sales in July were at their highest level since March 2016, while mortgage approvals for house purchases grew by 5.2 per cent between June and July, according to the Bank of England.

But the supply of housing remained low, with data from the Royal Institution of Chartered Surveyors (Rics) showing new instructions for home sales dropped for the 17th consecutive month in July and average stock levels on estate agents’ books neared an all-time low

Jeremy Leaf, north London estate agent and a former Rics residential chairman, said: “Before we get too carried away by the numbers it is worth remembering that house-price growth is being underpinned by a shortage of supply, including housebuilding, historically low mortgage rates and relatively low unemployment, rather than strong buyer demand. 

“Fewer transactions are taking place where affordability has been most stretched due to lack of new and existing stock, such as in London - and inflation higher than wage growth.

"The short-term impact of Brexit on the housing market was probably overestimated but the longer term effects may have been underestimated.

"However, now that the government is negotiating the UK’s exit from the European Union, further uncertainty seems inevitable until the final outcome becomes clearer."

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "Swap rates have remained pretty flat since the end of July and with many economists not expecting interest rates to rise until 2019 despite inflation remaining above target, the cheap mortgage rates that borrowers have been enjoying are unlikely to disappear any time soon. 

"As we head into the autumn which is traditionally a busier time of year for the market as people return from their holidays with renewed vigour to get things done and move by Christmas, there are plenty of attractive mortgage deals to tempt them."

simon.allin@ft.com