House price leap defies fears of referendum downturn in property market
House prices this August have made an unexpected rise of 0.6%, despite analysts predictions of a fall of between 1% and 2%, pushing the annual increase this year from 5.2% in July up to 5.6% in August.
Consumer confidence in the market, which suffered its biggest drop in 26 years in July following the Brexit vote, has also recovered somewhat, with the GfK barometer rising five points up to -7.
Official data from this month is also showing strong retail sales, and a rise in employment since the referendum.
However, the Bank of England has reported this week that the number of mortgage approvals made to home buyers fell to its lowest level for 18 months in July, which indicates that the vote to leave has had a cooling effect on the housing market.
Robert Gardner, Nationwide’s chief economist, said: “The pick-up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months.
“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 30-year lows. This helps to explain why the pace of house price growth has remained broadly stable.”
“It’s important not to hang too much significance on one or two bits of data because it’s still very early days,” said Laith Khalaf, analyst at Hargreaves Lansdown. “Judging the economic impact of Brexit right now is a bit like predicting the winner of the Premier League based on who’s at the top of the table after the first couple of games.”
Howard Archer, economist at IHS Global Insight, said: “Housing market activity is likely to be limited over the coming months and prices will weaken as prolonged uncertainty following the UK’s vote to leave the EU constrains consumer confidence and willingness to engage in major transactions, and also hampers economic activity.”