According to the latest report, house prices have increased 1.1% month-on-month having fallen by 0.2% in May. The annual rate of growth was 3.1%, up from 2.1%.
Having one of the most sceptical outlets acknowledge the growth in property values is very positive. Most economic indicators have taken a knock recently as the government approach to the negotiations has created some uncertainty and it has been noted by the markets that there has been some government infighting taking place.
As is often the case though, property markets are leading the recovery and appear to be bucking the wider trend. There are some caveats to the figures, however.
Robert Gardner, Nationwide’s chief economist, warned the monthly figures could be volatile and that an emerging squeeze on household incomes did appear “to be exerting a drag on housing market activity in recent months”, when speaking to Sky News.
He added: “Given the ongoing uncertainties around the UK’s future trading arrangements, the economic outlook remains unusually uncertain, and housing market trends will depend crucially on developments in the wider economy.
“Nevertheless, in our view, household spending is likely to slow in the quarters ahead, along with the wider economy, as rising inflation squeezes household budgets.
“This, together with ongoing housing affordability pressures in key parts of the country, is likely to exert a drag on housing market activity and house price growth in the quarters ahead.
“However, the subdued level of building activity and the shortage of properties on the market are likely to provide support for prices.”
However, a lot of these caveats seem to be heavily swayed by the London market which has been struggling for some time. Indeed, the capital saw its worst performance since 2012 in June with disappointing growth of 1.2%. The figures also showed the market in the South of England slowing, reinforcing the view held by many that Northern England is rapidly becoming more attractive to investors and landlords as the momentum disappears from the South and South East.
In a regional chart of price growth figures, the North West was third after East Anglia in first and the South West in second. The North West grew at an impressively steady 5% whilst London languished second bottom of the chart.
This news arrived at the same time as Sir Jon Cunliffe, a Deputy Governor of the Bank of England, joined the growing number of voices saying that now is not the right time for an interest rate hike. Sir Jon told the BBC he wanted to see how inflation pressures evolved before deciding to raise interest rates from a record low 0.25%.
He also wanted to watch and see if improvements in business investment and exports could compensate for a consumer slowdown. At its last rate rise meetings, three out of eight members of the Bank’s Monetary Policy Committee surprisingly voted to raise interest rates, jolting financial markets. The vote by the Bank’s policymakers was the closest for a rate rise since 2007, and came with inflation close to a four-year high of 2.9%. Inflation is now well above the Bank’s target rate of 2%.
It would be in the interests of investors and homeowners for the bank to keep interests rates low in order to stimulate further investment into the market, and it seems as though prices are set to continue to rise, albeit modestly over the rest of the year. Thankfully with demand extremely high yields are also holding strong for investors across the UK.