The annual rate of house price growth was 9.2pc
06-09-2016
House prices have grown faster than predicted, despite concerns that buyers would hold back ahead of this month's referendum on EU membership, and the market suffering a lull after the buy-to-let-surge of February and March.
The annual rate of growth in May was 9.2pc, unchanged since April, according to Halifax. Prices had been expected to rise 8.9pc in the year to May.
House prices in the three months to May were 1.4pc higher, after a dip of 0.8pc in the three months to April.
The fact that house prices have not dropped off substantially due to the referendum and the buy-to-let lull was “encouraging” said Jeremy Leaf, a former chairman of the Royal Institution of Chartered Surveyors. He added: “It is clear that house prices are being underpinned by a shortage of stock and substantial reduction in transaction volumes.”
Buy-to-let landlords had rushed to buy properties ahead of new stamp duty rules introduced in April, leading to a lull in the market after the deadline.
Meanwhile Government figures recently showed a 9pc fall in the number of houses built in the first quarter of this year compared to the same period in 2015.
Martin Ellis, Halifax housing economist, said: “Low interest rates, increasing employment and rising real earnings continue to support housing demand. The strength of demand, combined with very low supply, is causing house prices to rise at a brisk pace in quarterly and annual terms.”
He added that a slowdown in house prices in the second half of the year was likely due to crunched affordability, and house prices rising more quickly than wages. He said that these factors“should curb housing demand and result in some slowdown in house price growth as the year progresses.”
Samuel Tombs, economist at Pantheon Macroeconomics, said this continued growth was due to falling mortgage rates due to competition between lenders. He added: “High levels of both consumer confidence and household expectations of future house price growth also are incentivising purchases.
“Meanwhile, active housing supply remains constrained by high moving costs and still-inadequate house building. These drivers likely will remain in place after the referendum, ensuring that prices continue to rise at a strong pace.
At a glance - What Brexit would mean for... house prices
The Chancellor, the governor of the Bank of England, and ratings agencies Fitch and Moody’s, have all warned that house prices could fall substantially, by anywhere from 10- 25pc by 2018. The Treasury said that the average house in London will be £62,000 cheaper in two years after a vote for Brexit.
This would be because the economy would take a hit and people may find it harder to get a mortgage, therefore making demand levels lower. Campaigners for Vote Leave have said that this could conversely help first-time buyers get on the property ladder if prices fall.
The number of houses being built could also be affected as an already acute skills shortage would be increased if immigration was curtailed, affecting manual labourers, many of whom come from the EU.
London would be hit the hardest by a vote to leave the EU, because it has the highest proportion of foreign nationals in the country, many of whom may not be able to live there due to tighter immigration rules. This could lead to fewer people buying or living in the city, and would largely affect the top end of the market.
But many analysts and house builders say that while supply levels are so far behind demand, prices will continue to rise, whether we vote for a Brexit or not.