"While the increase in prices in August is encouraging and a little surprising, when you look behind the figures it becomes apparent that most of it is based on shortage of stock"
Robert Gardner, Nationwide's Chief Economist, said that the pick up in price growth is "somewhat at odds with signs that housing market activity has slowed in recent months".
New buyer enquiries have softened as a result of the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum. The number of mortgages approved for house purchase fell to an eighteen-month low in July.
Gardner added: “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 thirty-year lows. This helps to explain why the pace of house price growth has remained broadly stable."
Gardner said that most forecasters, including the Bank of England, expect the economy to show little growth over the remainder of the year, but believes that the MPC’s decision to cut interest rates to 0.25% "will provide an immediate benefit to many mortgage borrowers, though for most the boost will be fairly modest".
Jeremy Leaf, north London estate agent and former RICS residential chairman, commented: "While the increase in prices in August is encouraging and a little surprising, when you look behind the figures it becomes apparent that most of it is based on shortage of stock which we are also finding on the ground. It is important to try to concentrate more on the level of transactions rather than house-price moments, which can give a false sense of security.
"We are finding that an appetite to get on with buying and selling from those returning from holiday has been encouraging lately and we hope that continues into the autumn. People are negotiating very hard to make the deals that are being done happen."
Brian Murphy, Head of Lending at Mortgage Advice Bureau, added: “The data released by Nationwide today suggests a slight increase in house price growth both month on month and, more significantly, year on year. The summer is traditionally a quieter period with fewer buyers coming to market, but the continuing lack of supply plus the recent BoE interest rate cut, which has resulted in many lenders downpricing products, coupled with fewer vendors listing their properties in many areas of the country has no doubt helped to underpin the market over the last couple of months.
"It's also worth noting when comparing figures year on year that July and August in 2015 were unseasonably busy due to pent up demand following the General Election. That we’ve seen growth year on year within this context, given the current political and economic landscape, is significant and highlights ongoing consumer demand for property. It will be interesting to see how this translates going into the rest of the year, although it’s reasonable to suggest that with a record number of mortgage products now available, together with increasing flexibility in terms of lending criteria from many providers, those who are seeking to get on or move up the property ladder may find market conditions favourable to do so.”
