UK house prices increased by 0.3% in August, but the annual pace of house price growth edged down to 3.2% from 3.5% in July.
However according to Robert Gardner, Nationwide's Chief Economist, this partly reflects the high base for comparison, since prices increased at a particularly strong rate in August 2014.
Commenting on the figures, he said:
“This month’s data provides further evidence that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%.
“However, survey evidence cautions that this trend may not be maintained unless construction activity accelerates. Surveyors reported the lowest ever number of properties on their books in July (on data extending back to the late 1970s) whilst new buyer enquiries picked up."
Discussing why UK house prices have been more resilient, Gardner added:
“UK house prices didn’t fall as far during the financial crisis and even where they declined by a similar magnitude, UK prices generally recovered their pre-crisis levels more quickly. UK house prices are currently around 5% above their pre-crisis levels, while prices are still well below their pre-crisis peaks in Ireland (-38%), Spain (-36%) and the Netherlands (-18%).
“Supply side developments also play an important role in explaining the divergence in house price performance. The UK experienced a much smaller increase in building activity in the run up to the financial crisis. As a result, there was much less of an overhang of unsold properties to be worked off in recent years.
“However, with UK house building running well below the expected rate of household formation in recent years and with demand for homes rising, a significant increase in construction activity is required if affordability is not to become stretched in the years ahead.”
Jeremy Duncombe, Director, Legal & General Mortgage Club, commented:
“House price inflation has bucked the August seasonal trend due to the current lack of supply, which has pushed up prices compared to the same period last year. Insufficient supply has created a backlog of people looking to buy, resulting in greater demand in months that typically see a reduction in prospective buyers.
"An imbalance in supply and demand is bad for the overall health of the market as it makes properties unaffordable for many people who wish to own their own home. It also limits the amount of choice in the market, potentially causing people to settle for a home that doesn’t fully suit their wants and needs. In order to enable more people to achieve their dream of homeownership, more houses need to be built so that there are a suitable number of homes on the market for people to buy.”
