With housing transactions 'sluggish' and buyer demand falling, UK property values inched up by just 0.3% in July, according to Nationwide's latest house price index.

What’s the latest?

House price growth was muted in July with property values edging ahead by just 0.3%.

The increase, which followed a jump of 1.1% in June, left the average UK home costing £211,671, according to Nationwide Building Society.

The annual rate at which prices are rising remained broadly unchanged at 2.9%, compared with 3.1% the previous month.

But despite the subdued growth, there are signs that the housing market has stabilised, after Nationwide reported three consecutive months of falling prices in the spring.Above: A three-bedroom terraced home in Portsmouth, available for £255,000

Why is this happening?

There are growing signs that the housing market has been cooling, with transaction volumes dipping to an eight-month low in June.

Political and economic uncertainty caused by both Brexit and June’s General Election has prompted many potential buyers to hit the pause button.

High house prices relative to earnings has also led to affordability becoming increasingly stretched.

But the ongoing shortage of homes for sale, leading to a discrepancy between supply and demand, is supporting house prices and preventing widespread falls.Above: A two-bedroom detached bungalow in Winchester, Hampshire for £595,000

Who does it affect?

The shortage of homes for sale is creating a vicious circle in the housing market, leading to lower levels of activity.

Estate agents are seeing record low number of properties on their books. And the lack of choice is thought to be deterring existing homeowners from putting their properties on the market in order to buy their next house.

On a brighter note, the recent falls in activity among buy-to-let landlords, probably as a result of the higher stamp duty they now have pay, appears to have created an opportunity for first-time buyers to get on to the property ladder, as these groups typically purchase the same type of property. 

Sounds interesting. What’s the background?

Looking ahead, the future health of the housing market is likely to depend on developments in the wider UK economy.

Economic growth stood at ust 0.2% in the first quarter and 0.3% in the second quarter, and while unemployment remains low, rising inflation is putting pressure on real incomes.

Robert Gardner, Nationwide’s chief economist, said he expected housing market activity to remain subdued, with the balance in the market shifting a little further towards buyers in the quarters ahead.

But he added that with the property shortage continuing to underpin prices, Nationwide still expects house prices to end this year 2% higher than they started it.

Hansen Lu, property economist at Capital Economics, agreed: “With house prices set to stay high relative to incomes for some time, housing transactions sluggish and buyer demand still falling, the current stagnation in house prices is set to continue. We think annual house price growth will end 2017 and 2018 at 2%.”Above: A four-bedroom flat in Clacton-on-Sea for £359,995

Top 3 takeaways

  •  House price growth was muted in July with property values edging ahead by just 0.3%
  •  The increase left the average UK home costing £211,671
  •  The annual rate at which prices are rising remained broadly unchanged at 2.9%, compared with 3.1% the previous month

You might also be interested in...

How's the property market in YOUR area? Tell us by posting a comment below ...

* DISQUS *
comments powered by Disqus