UK house prices rebounded in July as growth accelerated to the fastest pace in eight months, but activity in the market remains flat, new figures have showed.
The average price of a UK home rose by 3.3 per cent to a new record £230,280 in the year to July, up from 1.4 per cent in June and the fastest rate of growth since November last year, according to mortgage provider Halifax.
Between June and July, prices rose by 1.4 per cent, or £3,253, up from a 0.9 per cent rise in June, while the quarterly rate of growth was 1.3 per cent higher than in the previous quarter and the highest since November.
Jump: House prices rose by 3.3 per cent in July, more than double June’s rate of growth
But Halifax managing director Russell Galley said that while the quarterly and annual rates of house price growth had improved, housing activity remained ‘soft’.
‘Despite the recent modest improvement in mortgage approvals, the latest survey data for new buyer enquiries and agreed sales suggest that approvals will remain broadly flat until the end of the year,’ he added.
He also said they did not expect the recent hike in interest rates to 0.75 per cent to have a ‘significant’ impact on either mortgage affordability or transaction volumes.
UK home sales fell by 3 per cent in June, with the figure for the three months to June unchanged compared to the previous quarter, Halifax said.
Brian Murphy, Head of Lending for Mortgage Advice Bureau, said: ‘Despite the rise in Bank Rate announced last week by the Bank of England, many lenders haven’t changed their rates as they had priced in for the increase previously, which is good news for buyers and those remortgaging alike.
‘As with growth in house prices, an interest rate increase is actually the sign of a robust economy, therefore coupled with today’s news, one might suggest that whilst the market isn’t fizzing away at top speed, it’s ticking over nicely through the summer months.’
Both the annual and quarterly rate of growth was the highest since November last year
The Halifax data follows last week’s figures by Nationwide, which showed a more modest 2.5 per cent annual rise and 0.6 per cent monthly rise.
Mike Scott, chief property analyst at estate agent Yopa, said the increase in prices does not reflect an increase in market activity, with both buyer and seller numbers remaining subdued.
‘The economic fundamentals underpinning the housing market remain strong, with high rates of employment, average wages rising faster than inflation and low interest rates. The Bank of England’s recent base rate increase was already largely priced into mortgage interest rates, and is unlikely to dampen the market significantly.’
Jeremy Leaf, north London estate agent and a former RICS residential chairman, also said July’s rebound in prices was mainly due to a shortage of homes on the market and continuing low mortgage rates.
‘It is almost as if the north/south divide is working in reverse with more activity outside rather than inside the capital,’ he added.
‘Soft’ activity: UK home sales have been falling
Howard Archer, chief economic adviser at the EY ITEM Club, was cautious and said: ‘We remain dubious that the housing market is seeing a sustainable shifting up of a gear.
‘Housing market activity is still relatively lacklustre and we expect it to remain so as the extended squeeze on consumer purchasing power only gradually eases, consumer confidence is relatively fragile and appreciable caution persists over engaging in major transactions.
‘Potential house buyers may also be concerned that they are likely to face further interest rate hikes over the medium term following August’s hike.’