Property prices

What's happening?




Thus far, in the post-Brexit world, the great house-price collapse many predicted simply hasn't materialised.

This was confirmed once again last week with the publication of the Nationwide's August house price index. In fact, it showed house prices rose by 0.6% in August, with the annual figure nudging up from 5.2% in July to 5.6% last month. The average UK house price currently stands at £206,145.

So what's happening? After all, demand, without a shadow of a doubt, has dropped off, as a result of both the stamp duty changes earlier in the year relating to second homes and buy-to-let, and the shock EU referendum result. Politically and economically, it's an uncertain time and this has been further underlined by the weakness in the latest mortgage approvals data. The average value of loans approved fell to £171k in July, a material decrease on the £177k average in the first six months of 2016.

As we have pointed out before in this column, the resilience of bricks and mortar has everything to do with the fundamental lack of supply — a shortage that's both structural and market-led. Structurally, there are simply too few homes being built, while current market conditions have seen a drought in new instructions. Sellers, unless it's absolutely imperative, just aren't willing to put their homes on the market in what is increasingly looking like a buyer's market. Alternatively, and like many buyers, they’re waiting to see how things pan out.

So if that's what's happening now, what's happening next? Robert Gardner, Nationwide chief economist, puts it as follows and it's hard to disagree with much of what he says. Essentially, the jobs market and consumer sentiment will be pivotal to the post-Brexit property market denouement. “What happens next on the demand side will be determined, to a large extent, by the outlook for the labour market and confidence among prospective buyers.

“It is encouraging that the unemployment rate remained at a 10-year low in the three months to June, though labour market trends tend to lag developments in the wider economy ... However, business surveys suggest that the manufacturing, services and construction sectors all slowed sharply in July, and, if sustained, this is likely to have a negative impact on the labour market and household confidence.”

In a nutshell then, in the months ahead the employment numbers will be the ones to watch. They will reveal, in the rawest possible form, and away from all the political spin of the pro-EU and pro-Brexit camps, what’s happening to the UK economy. The next set is out on 14th September, so be sure not to miss them.

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