United Kingdom: House prices shows signs of life in June
June 30, 2017
According to the Nationwide Building Society (NBS), house prices in the United Kingdom rose 1.1% in June compared to the previous month in seasonally adjusted terms, stopping a rot of three consecutive monthly price declines and contrasting May’s 0.2% fall. On an annual basis, house prices rose 3.1% in June, up from 2.1% in May, thus returning to the 3.0%-6.0% range observed in recent years. The average house price in June was GBP 211,301 (June 2016: GBP 204,368).
The uptick in house prices comes despite an ongoing squeeze on consumers, who are feeling the full force of meager wage growth. Although at this juncture it is difficult to read too much into one month’s figures, June’s rise could be a result of rock-bottom unemployment and low mortgage rates, or a symptom of the very limited number of homes on the market. Looking at figures for Q2 as a whole, there was a notable slowdown in annual house price growth across virtually all regions of the country, while the gap between the fastest and slowest growing regions was the lowest on record. This is partly a result of a slowdown in the South East, which has until recently observed sustained price rises. London’s property market in particular is finally cooling following a spectacular bubble which has seen average house prices shoot up by over 50% since 2012.
Looking ahead, demand looks set to be sluggish, as consumers’ purchasing power withers due to the impact of higher inflation and subdued nominal wage growth. At the same time, the longstanding problem of a lack of housing supply is unlikely to disappear any time soon, which should prop up prices, leading to a mild price rise for 2017 as a whole.
Author: Oliver Reynolds, Economist