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House prices hit record high - but experts warn that could all be about to change


07-29-2016

The Brexit vote could lead to a weaker demand for homes in the future, a building society has warned

House prices
Getty 
House prices have reached record levels

House prices lifted to a new record in cash terms in July, passing £205,000 on average for the first time, according to an index.

But Nationwide Building Society, which released the figures, cautioned that the increased economic uncertainty following the EU referendum could lead to weaker demand for homes in the near term.

It said that with the housing market in an "unusually uncertain" condition, it may take several months to see clearly what the underlying trends are.

The typical UK property value was £205,715 in July, marking a 0.5% increase compared with June.

House prices are 5.2% higher than a year earlier, accelerating from annual growth of 5.1% in June.

For sale signs stand outside properties
Getty 
The typical UK property value was £205,715 in July, marking a 0.5% increase compared with June

Average house prices tipped over the £200,000 mark in March and have been moving steadily upwards since.

Robert Gardner, Nationwide's chief economist, said it is important to note that the index is compiled using data when buyers are at the "mortgage offer" stage.

He said this means any impact from the referendum "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".

Mr Gardner said it will be difficult in the months ahead to determine how much of any potential softening of the housing market over the summer is due to the referendum result, and how much is due to a stamp duty hike which came into force on April 1 for second home buyers, including buy-to-let-investors.

He said: "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."

Getty To Let and For Sale signs protrude from houses
Experts have warned the boom could slow in the near future

Mr Gardner added: "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.

"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, though these trends pre-date the vote and are likely to have been impacted by the recent tax changes as well as the referendum."

Mr Gardner said much of the demand for homes in the months ahead will depend on how the labour market evolves.

He said: "It is encouraging that conditions were robust in the run-up to the vote, with the unemployment rate falling to a 10-year low in the three months to May.

 
For sale sign outside UK terraced houses
Getty Images 
Much of the demand for homes in the months ahead will depend on how the labour market evolves, experts predict

"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 demand for homes weakens, the impact on house prices is not certain, he said, as potential sellers may just hold off from putting their homes on the market.

This would keep the supply of homes on the market tight and help to hold prices up as buyers would be competing for relatively few homes.

Mr Gardner said: "The stock of homes on estate agents' books is already close to its lowest level for 30 years, and surveyors have reported a decline in new instructions to sell alongside a fall in buyer enquiries.

"Moreover, house builders may react to the uncertainty by delaying construction, even though home building is already failing to keep up with the natural increase in the population.

"The outlook for the housing market remains unusually uncertain and it may take several months for the underlying trends in the market to become evident."

www.mirror.co.uk/

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