Tag Archives: economy
Latest house price index shows no Brexit effect on UK property prices
House prices in the UK increased by 0.5% month on month in July, defying the vote to leave the European Union which many commentators though would have an adverse effect on the nation’s property market. It means that the annual rate of house price growth edged up from 5.1% in June to 5.2% in July, taking the average price of a home to £205,715, according to the data from the Nationwide House Price Index. It is the first index from a major lender to be published since the historic vote on 23 June and overall the index report says that the UK housing market is still seeing steady growth. However Nationwide chief economist Robert Gardner said it is important to note that the index is based on data at the mortgage offer stage so there still might be an impact in future data. ‘It means any impact from the vote may not be fully evident in July’s figures, as there is a short lag between a buyer making the decision to purchase a property and applying for a mortgage,’ he explained. He also believe that the outlook can only be described as uncertain. ‘It will be tempting for commentators to assign any trends in the coming months to the impact of the referendum. Housing market transactions were always likely to soften over the summer after the surge in activity in March, as buyers brought forward purchases of second homes to avoid the stamp duty levy, which took effect in April,’ he pointed out. ‘Determining how much of any fall-back in activity is the result of the tax changes and how much is due to the referendum will be difficult. In the near term, increased economic uncertainty may lead to weaker demand for homes. Leading indicators are consistent with softening ahead. Household confidence fell sharply in the wake of the referendum result, especially attitudes towards making major purchases, which in the past has correlated with mortgage activity, though less closely in recent years,’ he added. He also pointed out that in the run up to the vote the Royal Institute of Chartered Surveyors (RICS) reported declines in new buyer enquiries and expectations of weaker price growth amongst surveyors. ‘Although these trends predate the vote and are likely to have been impacted by the recent tax changes as well as the referendum. How the labour market evolves will be crucial in determining the demand for homes in the quarters ahead. It is encouraging that conditions were robust in the run up to the vote, with the unemployment rate falling to a ten-year low in the three months to May,’ Gardner said. ‘The decline in long term interest rates to new all-time lows in recent weeks should also help to keep borrowing costs low and provide some support for demand. Even if there is a fall back in demand as a result of economic uncertainty, the impact on house prices is not certain, as potential… Continue reading
Rate of city house price growth in UK starting to plateau
The rate of house price growth in key cities in the UK is starting to plateau after a strong first half of the year with London in particular likely to see slower growth ahead, according to the latest index data. Month on month the Hometrack Cities Index recorded growth of 6.9% in June and year on year growth is running at 10.2%, the same level as the previous month. The index report suggests that double digit year on year growth has been sustained by the surge of investor demand ahead of the stamp duty change in April while low mortgage rates and improving economic conditions have continued to attract households into the market against a backdrop of dwindling supply with the net result being continued upward pressure on prices. In June Bristol remained the fastest growing city with year on year price growth of 14.7% taking the average price to £253,400, followed by London with annual growth of 13.7% to £476,800 and then Cambridge up 11.5% to £411,800. The data also shows a strong uplift in price growth in large cities such as Glasgow, Manchester, Liverpool and Leeds where house prices are comparatively affordable and yields above average and attractive to investors. Month on month the highest growth was in Oxford at 9.6%, followed by Cambridge at 9.5%, London at 8.2% and Bristol at 7.8%. At the opposite Aberdeen has seen prices fall by 8.2% year on year but the city recorded a small uplift month on month of 0.3%. The report points out that any impact from the decision by the UK to leave the European Union will not be reflected in the index for two to three months. ‘That said, we have reported signs of slowing growth in some cities, particularly in southern England where affordability levels are close to record highs. The slowdown might have been more apparent by now had the stamp duty change not been introduced,’ it says. A new analysis looking at listings also shows that for selected cities new supply has grown faster in the last three months than the average increase in supply seen over the last 12 months. For all cities in England and Wales excluding London new supply has grown 10% faster than the 12 month average, this rises to over 15% in London. In contrast, the relative change in sales over the last three months has registered a relative fall of 8% in London meaning that 8% fewer homes sold in the last three months compared to the 12 month average. The relative change in Bristol is 0%, while in larger regional cities, where house price growth has been picking up momentum, the relative change is sales is positive at up to 7% in Manchester. 'This analysis shows how recent sales momentum in regional cities, and higher house price growth, appears to have held up over the referendum period. In contrast, the headwinds facing the London market ahead of the vote… Continue reading
UK gross mortgage lending up 16% in June month on month
Gross mortgage lending in the UK reached £20.7 billion in June, some 16% higher than May’s lending total of £17.8 billion, and 3% higher than the £20.1 billion lent in June last year. The data from the Council of Mortgage Lenders (CML) shows that this is the highest June figure in eight years when gross lending reached £22.6 billion in 2008. Gross mortgage lending for the second quarter of 2016 was therefore an estimated £56.1 billion but this is 10% lower than the first quarter of this year, but 8% higher than the second quarter of 2015. ‘The result of the European Union referendum is likely to affect the housing market, but there remains considerable uncertainty,’ said CML senior economist Mohammad Jamei. ‘Although mortgage firms have ample lending capacity, activity levels are likely to bear the brunt of any market adjustment over the next six months or so, as buyers and sellers wait to get a clearer idea of where we might be headed,’ he explained. ‘But as with the economy, the UK housing market’s starting position is relatively favourable, with transactions having increased by almost 80% from post-crisis lows. Over the next six months, activity is likely to soften modestly, while lending will be driven more by remortgaging and less by house purchases,’ he added. ‘We also expect some form of monetary easing to be undertaken by the Monetary Policy Committee when it meets on 04 August, given the uncertain outlook that has set in after the vote result,’ he pointed out. According to John Goodall, chief executive officer of peer to peer platform Landbay, this spike in mortgage lending levels in June suggests both home buyers and sellers refused to sit on their hands in the run up to the EU referendum result. ‘The market has been something of a rollercoaster ride since the Stamp Duty stampede at the start of 2016, but while the mortgage market continues to find its new normal, its foundations continue to show strength,’ he said. ‘We’re yet to see the long term effects of the Brexit vote on market activity, but it’s clear that the UK’s housing shortage will remain the pivotal issue in defining the future health of the sector. Theresa May has made her political intentions clear for further housebuilding pledges, but must recognise the vital importance of the private rented sector in the housing mix,’ he pointed out. ‘Even with a radical programme to combat housing shortages, supply has a mountain to climb before it catches up with demand, so even a moderate house price correction would do little to hamper the UK’s reliance on the buoyant buy to let market,’ he added. Continue reading
