The latest house price index from the Nationwide Building Society shows house prices rising 1.1 percent in June, which reverses the falls seen in the previous three months.
On an annual basis house prices rose 3.1 percent in the year to June and the price of an average house now stands at £211,301, which is up on the £208,711 seen in May, according to the mortgage lender.
The lender also reports that on a quarterly basis the gap of just four percent in house price growth between the strongest and weakest performing regions in 2017 Q2 is the smallest on record. Also, “for the first time in eight years, price growth in Northern England (West Midlands, East Midlands, Yorkshire & Humberside, North West and North) exceeded that in Southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia)” said the Nationwide.
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said:
“UK house prices rebounded in June, with prices rising by 1.1% during the month, erasing the decline recorded over the previous three months. However, monthly growth rates can be volatile, even after accounting for seasonal effects.
“The annual rate of house price growth, which gives a better sense of the underlying trend, continues to point to modest price gains. Annual house price growth edged up to 3.1% from 2.1% in May. In effect, after two sluggish months, annual price growth has returned to the 3-6% range that had been prevailing since early 2015."
Howard Archer, Chief Economic Advisor to the EY ITEM Club, comments:
“The Nationwide reported house prices climbed 1.1% month-on-month in June. This was the sharpest monthly increase since April 2015 and was well above expectations.
“House prices can be volatile from month to months and June’s rise needs to be seen in the context that house prices had previously fallen in each of the previous three months which was the first time this had happened since 2009. Indeed, house prices still edged down 0.1% quarter-on-quarter in the second quarter.
“Annual house price inflation on the Nationwide’s measure rose back up to 3.1% in June after dipping to a 35-month low of 2.1% in May.
“Housing market activity is currently stuttering amid weakened consumer fundamentals with latest BBA data showing mortgage approvals for house purchases slowing for a fourth successive month. Additionally, the Royal Institution of Chartered Surveyors’ influential survey showed buyer enquiries, instructions to sell and housing sales all declining in May.
“Despite June’s rebound, house prices still look unlikely to rise by more than 2% over 2017 and are set to remain soft in 2018.
“The fundamentals for house buyers are likely to deteriorate further over the coming months with consumers’ purchasing power squeezed even more by a damaging combination of higher inflation and muted earnings growth. It is also very possible that the labour market will increasingly falter despite its current resilience. Additionally, housing market activity is likely to be hampered by soft consumer confidence and reduced willingness to engage in major transactions. Confidence will likely be pressurised not only by weakened purchasing power but also by heightened economic and political uncertainty.
“Potential house buyers may also be concerned by signs that the Bank of England could be near to hiking interest rates. While any increase in interest rates would be small and mortgage rates would still be at historically very low levels, the fact that it would be the first rise in interest rates since mid-2007 could have a significant effect on housing market psychology by focusing minds on the fact that sooner or later consumers will have to deal with higher mortgage rates.
“Housing market activity and prices are also likely to be pressurised by stretched house prices to earnings ratios and tight checking of prospective mortgage borrowers by lenders. According to the Halifax, the house price to earnings ratio reached 5.81 in December (the highest level since August 2007) and was still as high as 5.75 in May. This is well above the long-term average of 4.19. Furthermore, mortgage lenders are under pressure from the Bank of England to tighten their lending standards.”
“The downside for house prices should be limited markedly by the shortage of houses for sale. High employment and very low mortgage rates are currently still supportive.”