The UK’s housing market regained some momentum in June, according to Nationwide’s latest house price survey, though growth in the south-east and London continued to slow compared to the rest of the country. On average, house prices rose 1.1 per cent over the month, the first rise in four months. The increase brought the year-on-year growth rate up to 3.1 per cent, well above a consensus forecast of 1.9 per cent. However, the monthly uptick was not enough to stop quarterly price growth slowing markedly. Average prices in the three months to June were 2.8 per cent higher than the same period last year, compared to 4.1 per cent growth in the first quarter. On a quarter-on-quarter basis, prices dipped 0.1 per cent. London and the south-east – which have seen much faster price rises than the rest of the country since the financial crisis – appeared to be suffering more than most of the country from the recent slowdown. Nationwide said year-on-year growth in the south overall has converged with the rest of the country, while London in particular was the second worst-performing region in the second quarter, with year-on-year price growth of just 1.2 per cent. Robert Gardner, Nationwide’s chief economist, said:
″The emerging squeeze on household incomes appears to be exerting a drag on housing market activity in recent months. The number of mortgages approved for house purchase has slowed a little in recent months and surveyors report that new buyer enquiries have softened.
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.″
Howard Archer, chief economic advisor to the EY Item club, said that, despite the decent monthly performance, “house prices still look unlikely to rise by more than 2 per cent over 2017″.
He added: ″The fundamentals for house buyers are likely to deteriorate further over the coming months with consumers’ purchasing power squeezed even more by a damaging combination of higher inflation and muted earnings growth. It is also very possible that the labour market will increasingly falter despite its current resilience.″