House prices defy gloomy post-Brexit forecasts
Nationwide report shows property market grew in July while a leading think-tank predicts £40,000 rise in five years
House prices defied the gloomy predictions of experts and picked up pace in July, the Nationwide said.
In addition, respected think-tank the Centre for Economics and Buyout Research (CEBR) says property will continue to climb in value and increase £40,000 in five years, despite a slowdown in growth in the short to medium term.
It’s all a far cry from some of the more pessimistic forecasts making headlines since the Brexit vote at the end of June, which have predicted falls by ten per cent or more in the next year.
Nationwide's data, the first to take into account housing market transactions since the referendum result, shows the average house price increased 0.5 per cent in July to £205,715, up from the rise of 0.2 per cent between May and June. The annual growth rate was up by 0.1 per cent, to 5.2 per cent.
However, Nationwide did offer a note of caution, saying the figures were based on issued mortgage offers, which Reuters says normally lag actual decisions to purchase by several weeks. A hit to buyer sentiment may therefore not be fully apparent.
It also warned that "leading indicators are consistent with softening ahead", reports the Financial Times, although the building society added this may help support prices if it is driven by people deciding not to sell as it would exacerbate a supply shortfall.
Cebr predicts this underlying supply-demand dynamic will keep the market rising even through a prolonged period of Brexit uncertainty.
Like Nationwide, it expects a slowdown in transactions and is predicting growth will moderate in the second half of this year before dipping to 2.2 per cent in 2017. Overall, it says prices will be £40,000 up from current levels by 2021, reports the Daily Telegraph.
London will be harder hit, but Cebr says the luxury end of the capital's market was "showing cracks well before the vote on June 23".
Senior economist Nina Skero said: "Although Brexit has certainly sent shockwaves, [we expect] the housing market to slow down but not plummet. Years of underbuilding mean that demand would have to fall very dramatically to meet the low level of supply increases."
House prices were falling in Scotland before Brexit vote
House prices in Scotland were falling in the three months leading up to the Brexit vote in June, newly-published official figures reveal.
Registers of Scotland says the average residential property sold for £164,326 in the period, a drop of 2.3 per cent on 2015.
Experts have predicted house price growth will slow in the wake of the EU referendum result, which could hit the wider economy.
Various indices have indicated that average valuations across the whole of the UK were accelerating before the vote, primarily because of a chronic shortage of supply.
However, there is a different dynamic at work in Scotland and the falls in the past quarter are not seemingly related to the EU referendum.
The new figures show that unlike the wider UK, transaction volume surged by 4.9 per cent to 25,760 over the three months in question, the highest activity for this period since 2008 - immediately before the financial crash.
Registers of Scotland said the surge, which has boosted the total value of housing market transactions by 2.5 per cent to £4.2bn, marks the continuation of a trend that set in last year, ahead of a hike to stamp duty for second homes.
Director of commercial services Kenny Crawford said the statistics "reflect a robust and active property market" that "continues to make an important contribution to the Scottish economy".
Faisal Choudhry, the director of Scottish research at Savills Scottish Research, told The Times a lack of new-build supply meant more transactions related to old local authority houses, which in Scotland typically fetch lower prices.
He said: "Around three or four years ago, there was building occurring in areas such as West Dunbartonshire. But those sites have since sold out. They have not been replaced."
West Dunbartonshire was the worst performing area in the past year with a fall of 12.7 per cent, the BBC notes. Aberdeenshire and the city of Aberdeen also fell by ten per cent and six per cent due to a slump in the oil and gas sector.
East Renfrewshire, to the south-west of Glasgow, was the best performing region, up almost 12 per cent to £241,364.
House prices post-Brexit: 'More of a soft landing than a crash'
A picture is emerging in the housing market since the Brexit vote of lower transaction volumes and a slower pace of growth, but experts say there have so far been few signs of a crash.
Jeff Matsu, a senior economist at the Royal Institution of Chartered Surveyors (Rics), told the Daily Express property prices are softening across the country since the referendum but are mostly still in positive territory.
"We are not seeing a price decline, other than in London," he said. "Price growth is moderating. It's still increasing, but less so than it was."
A survey of Rics members published earlier this month found most estate agents and surveyors expect prices around the UK to dip in the next three months and for up to 12 months in London. Within five years, however, they expect them to be 14 per cent up from current levels.
Jonathan Hopper, the managing director of UK buying agents Garrington Property Finders, said the market is seeing "more of a soft landing than a crash".
"It's very much case by case. The overarching message is expect, in the short-term, further softening of prices and a slowdown in transaction volumes," he said.
Meanwhile, a separate survey out today from Lloyds Bank highlights one of the enduring inflationary effects on house prices in the country - the "Waitrose effect".
In short, proximity to a supermarket increases the value of a home by an average of £20,000 – but this difference can almost double if the store is one of the more upmarket brands.
Houses with a Waitrose within the postal district are reportedly worth £38,666, or ten per cent, more than those in the surrounding area. This was down slightly from 12 per cent last year, the Daily Telegraph says.
Living near a Sainsbury's or Marks & Spencer commands a premium of £27,000, while a Tesco brings £22,000. In contrast, living near an Aldi adds £1,300.
Lloyds Bank mortgage director Mike Songer said: "Of course, there are many other drivers of house prices beyond having a supermarket on your doorstep, but our research suggests that it is a strong factor."
London house prices could be helped by Chinese buyer surge
London's under-pressure housing market could find some support from Chinese buyers, who are flocking to estate agents and developers to snap up post-Brexit vote bargains.
China’s biggest international property portal, Juwai, says the number of buyer enquiries into UK properties was 40 per cent above the long-run average in the month after the referendum, reports the Daily Telegraph.
Interest appears to be picking up especially since Theresa May won an early coronation as prime minister, providing some much-needed political certainty. Enquiries doubled last week from the week before, says the Wall Street Journal.
Following the referendum, overseas buyers had initially backed off from purchases in the UK market – and in London especially – as fears of a recession weighed on sentiment.
But interest is returning with the economy appearing to be holding ground and a weak pound effectively offering substantial discounts to international buyers – sterling remains around 10 per cent down against the dollar and near a 30-year low.
Bernie Morris, the head of Juwai’s UK, Europe and Middle East division, said: "The data show that the Brexit vote has definitely boosted Chinese buyer interest in UK property. The chief mechanism has been the reduction in the value of Sterling against the dollar and the yuan.
"Now, with politics stabilizing and a competent new government in place, the UK looks like the same old safe haven as ever – but cheaper.
"There have been a lot of drags on the property market in recent months. First, it was the elections, then the referendum and now summer. But that is exactly why the weaker pound has come at the right time. It's summer and the Chinese are coming."
With more than half of all Chinese buyers looking in London, the booming interest could provide a much-needed boost amid predictions house prices in prime areas may see drops of up to 20 per cent or even more.
It is unlikely the China effect will be enough to stop prices falling altogether, however. Chinese interest in UK property has been on a downward trajectory for months and makes up around five per cent of purchases in the capital.
The number of properties in London offering a price discount surged 163 per cent in the 12 days after the referendum result was announced, the Financial Times says.