United Kingdom: Housing market softens in August
August 31, 2018
According to the Nationwide Building Society (NBS), house prices in the United Kingdom declined 0.5% in August compared to the previous month in seasonally adjusted terms, down from July’s revised 0.7% increase (previously reported: +0.6% month-on-month). On an annual basis, house prices rose 2.0% in August, down from 2.5% in July. The average house price in August was GBP 214,745 (August 2017: GBP 210,495). Despite the weak August figures, the overall housing market picture was little changed; annual price growth remained within the 2%-3% band which has prevailed over the last year.
Going forwards, house prices are likely to continue to increase at a mild rate, underpinned by tight supply. In addition, a gradual recovery in real wages should support demand. However, pessimistic consumer sentiment will likely weigh on the market. Monetary conditions will be another key determinant of the evolution of prices. With the Bank of England raising rates at its August meeting, this will have a slight knock-on effect on borrowing costs going forward for those with variable mortgages.
Author: Oliver Reynolds, Economist