House Price Rises Continue To Be Driven By Desperately Low Supply
UK house prices rose again in September to hit record highs across most of the country according to the Halifax House Price Index.
The lender’s data showed house prices grew on a monthly, quarterly and annual basis during the last month, which comes on the back of rises in August.
The Bank of England’s much-anticipated rise in the Base Rate would not have a significant effect on transaction volumes.
The average house price in the UK now stands at £225,109; up 0.8% compared to August and up 1.4% on the previous three months (April to June). House prices have risen by 4% since September, 2016.
This comes in the face of data from the Royal Institute of Chartered Surveyors (RICS) which continues to show that properties available for sale remain at chronically low levels. It is this shortage of properties which is driving price rises.
Halifax managing director Russell Galley said: “While the quarterly and annual rates of house price growth have improved, they are lower than at the start of the year. UK house prices continue to be supported by an ongoing shortage of properties for sale and solid growth in full-time employment.
“However, increasing pressure on spending power and continuing affordability concerns may well dampen buyer demand. There has been recent speculation on the possibility of a rise in the Bank of England base rate. We do not anticipate this will have a significant effect on transaction volumes.”
This assessment of market is echoed by professional mortgage brokers throughout the country. Greg Oxenham, Practice Principal at Cardiff brokerage Mortgage ID said that despite Halifax’s overall assessment of the market the UK property market was in stasis and it was unlikely to change until major economic and political factors filtered through.
“The growth in house prices we are experiencing is not a product of consumer confidence and economic strength. Factors point to this being driven purely by shortage of supply” he said.
“a shortage of properties for sale, a strong jobs market and structural supply problems are all that is keeping the property market afloat.”
Oxenham said that he did not anticipate a rise in base rates by the Bank of England of more than .25% between now and January but would not rule out further rises in the Spring as the economy continued to grow as the positive aspects of Brexit became more clear.
The back drop is too uncertain for anything more than a nominal rise in interest rates while the economic stakes remain uncertain,” he continued.
The assessment of industry insiders appears to confirm this view which reinforces the growing conclusion that transactional volumes may be negligible in the near term.
“Only when we see interest rates topping out above .75% will we start to see confidence impacted. In the past, rises of this magnitude have usually been followed by increased pressure on prices”
Until then, buyers will continue to drive the market and keep increases modest. It will also ensure that relatively low volumes are with us for some time to come.