Britain’s vote to leave Europe has so far had little discernible effect on UK house prices, according to one of two major surveys by British mortgage lenders.
The Nationwide house price index showed prices rose 5.6 per cent in August compared to the same month a year earlier, a pick-up from 5.2 per cent growth the previous month and a stronger rate than expected by economists, who had pencilled in a 4.8 per cent rise.
Last month’s growth was the best since March, when prices were bolstered by a rush by buy-to-let investors and second home buyers to beat changes to stamp duty rules at the start of April.
Compared to the previous month, prices edged up in August by 0.6 per cent, according to Nationwide, defying market forecasts for a 0.2 per cent fall.
The Nationwide survey is just the latest of several studies that suggest house prices have held up pretty well since the Brexit vote on June 23 and have so far defied some gloomy predictions before the referendum of a crash. Whether those favourable conditions will last is up for debate, however. Data from from the Bank of England yesterday showed mortgage approvals fell to an 18-month low in July and housing experts suggest prices are being maintained by a lack of available supply coming onto the market.
Nationwide’s chief economist, Robert Gardner, said of the August survey results:
The pick up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months. New buyer enquiries have softened as a result of the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum. The number of mortgages approved for house purchase fell to an eighteen-month low in July.
However, the decline in demand appears to have been matched by weakness on the supply side of the market. Surveyors report that instructions to sell have also declined and the stock of properties on the market remains close to thirty-year lows. This helps to explain why the pace of house price growth has remained broadly stable.
But Samuel Tombs, an economist at Pantheon Macroeconomics, warns that the Nationwide index “conflicts with other signals.”
The indication from the Nationwide data that house price growth strengthened after the Brexit vote is incongruous to all the other noises from the housing market. For instance, the net balance of surveyors reporting to RICS’ Residential Market Survey that prices increased over the previous three months collapsed to +5 in July, from an average of +36 in the first half of 2016.
In addition, yesterday’s mortgage approvals data showed that the average value of loans approved by all lenders for house purchases fell to £171K in July, from £177K in the first six months of 2016.
The Nationwide measure is based only on the lender’s mortgage offers, so it susceptible to sampling issues.
(Top chart: Bloomberg. Second chart: Pantheon.)
