Property values rise slightly for the second month in a row even as transactions and mortgage approvals decline
A shortage of homes for sale has kept house prices rising despite falling consumer incomes and political uncertainty, according to Nationwide.
The building society said the price of the average house went up by 0.3% in July to hit a new peak of £211,671. But the annualised growth figure dropped from 3.1% to 2.9%.
The resilience of house prices has surprised economists as they contrast with falling transactions – at their lowest level for eight months – and the number of mortgages approved, which have also fallen to a nine-month low.
Nationwide reported three months of falling prices in March, April and May, but June and July have seen prices rise again.
“On the surface, this appears at odds with recent signs of cooling in the housing market,” said Robert Gardner, Nationwide’s chief economist.
“But a lack of homes on the market appears to be providing support, with annual house price growth remaining only just outside the 3-6% range that has been prevailing for most of the past two years. This pattern looks set to be maintained in the near term.”
Gardner pointed to surveys which show that the number of properties coming on to the market is slowing, and the number of homes on estate agents’ books is close to a 30-year low.
But with household budgets under pressure, and wage growth failing to keep up with the cost of living, Nationwide is forecasting “subdued” housing market activity, and says prices are likely to rise by just 2% over the whole of 2017.
Jonathan Samuels of property lender Octane Capital said: “Weak supply has once again ridden to the rescue of house prices. The shortage of homes, both for sale and being built, is preventing prices from falling sharply.
“Record low mortgage rates are helping what demand there is, but it’s hard to see anything other than a sideways-moving market for the rest of 2017.”
The lack of sales, plus competition from online operators, will mean that one in five estate agents are likely to go out of business, according to a report earlier this week.
Almost 5,000 estate agents are showing signs of “financial distress”, according to accountancy firm Moore Stephens.