UK house prices remained stable over August, suggesting the blistering pace at which they were shooting upwards could have eased over recent months, Britain’s biggest mortgage lender, Halifax, revealed in today’s freshly published data.
Average property price growth across the UK stood at a paltry 0.1% for August, which can be quite strikingly contrasted with July’s upwelling of 1.2%. Moreover, reading at £186,270, August’s average price for a house in the UK marked a 9.7% increase over the last 12 months, which is inferentially absorbing when July’s record upsurge in house price growth of 10.2% on the previous year is considered.
A fiery housing market has been a glaring trait of a less-than-fiery summer, as far as the overhead conditions are concerned, however would-be buyers within the capital will welcome Halifax’s latest revelations hoping they shed some sorely sunlight on their housing aspirations. The lender noted that precursors to a housing market recovery were emerging, with supply in the capital becoming more plentiful coupled with heightened trepidation from London buyers’ having a dampening influence.
The pending threat of an interest rate hike would certainly have led to the intensification of buyer’s angst, and this diminished demand is expected to continue over the coming months. Moreover an influx of both second hand properties and new housing projects will further enhance the UK’s supply, in prospect further stabilising the housing market.
Yet, consumers cannot be blamed for the sizeable amount of salt they might take this latest cooling development in the housing market with – house prices have soared at times over the past year. Outstripping wage growth by over 5 to 1, in accordance with Halifax’s formula which is derived from Office for National Statistics, the turbulent nature of house price growth has been frequently evidenced in recent times. The capital, and its commuter belt, have been especially affected by these mercurial conditions, with sellers at one point seemingly automatically afforded the leverage with which to extort buyers hooked on the prospect of residency in the locality of London.
The unpredictability of the housing market is reflected in the up and downswings of Halifax’s 2014 monthly data, with the lender recording five instances of monthly price growth and 3 monthly price drops over the course of 2014. Moreover, its competitor Nationwide had average monthly property growth for August at 0.8%, depicting the almost inherent disparity in housing figures, when varying factors are accounted for.
Perhaps this unpredictability stems from conflicting factors constantly shifting the balance between supply and demand this way and that. For instance, growing employment is conventionally indicative of a surge in demand for housing, however low wage growth in real terms organically dampens demand. Moreover, the skewedness of the data regarding unemployment has been contended in recent times, as a result of the issue of low pay. These factors seem to suggest that wage growth requires a timely injection of impetus, however the manner in which policymakers intend to address this hotly-debated issue is by definition, mercurial in itself.
“Housing demand is supported by continuing economic recovery, growth in employment, improving consumer confidence and low mortgage rates. Nonetheless, earnings growth that remains below consumer price inflation, and the prospect of an interest rate rise at some point over the coming months, are likely to curb demand,” said Martin Ellis, economist at the Halifax.
“There are some signs of an improvement in housing supply, both in terms of more second-hand properties coming onto the market and increased numbers of new homes. These trends, if sustained, should help to improve the balance between supply and demand, contributing to an easing in the pace of house price growth.”
Howard Archer, top economist at IHS Global Insight, projects UK house prices to continue growing at a more gradual pace reflected in a 2% further increase by the end of 2014. This is to increase to 6% for 2015, as the rest of the UK (outside London) begins to catch up with the capital.
He said: ‘The Halifax data ties in with our view that house prices will keep on clearly rising overall through the coming months, but at a more restrained rate ‘Buyer interest is likely to stay relatively healthy even if it has come off peak levels, as it should be supported by elevated consumer confidence, markedly rising employment, and still low mortgage interest rates ‘It is also currently being supported by the Help to Buy initiatives. Meanwhile, earnings growth is expected to improve over the coming months despite the current weakness. ‘Even so, some restraint on buyer interest is expected to come from more stretched house prices to earnings ratios, the prospect that interest rates will soon start to rise (albeit gradually) and tighter checking of prospective mortgage borrowers by lenders.’ An interest rate hike and further gloom over earnings’ interlocking inflationary ill health do not moderate the innate unpredictability of the UK housing market, nor will they serve to assuage the cautious buyer’s understandable housing anxiety. However, steadier variations will be unequivocally welcomed by the majority.