House prices rose almost £2,500 in August as a late summer bounce continued but property inflation remains near the lowest level for four years, figures revealed today.
Slow wage growth, high house prices and inflation are holding home buyers back, mortgage lender Halifax said, as it released its latest monthly house price index.
Its figures showed average house prices across the UK up by 1.1 per cent, or £2,375, in August to reach a new record high of £222,293.
House prices rose almost £2,500 in August as a late summer bounce continued, but the annual rise in prices is near its lowest level in four years
Annual property price inflation picked up from 2.1 per cent in July to 2.6 per cent last month, but is down substantially on the 8.4 per cent recorded a year ago.
The annual change in house prices in near to the lowest level since spring 2013.
However, Halifax flagged most recent HMRC data showing that property sales had edged up to 104,760 between June and July – exceeding 100,000 for the seventh month in a row.
Russell Galley, managing director, of Halifax community Bank, said: ‘Recent figures for mortgage approvals suggest some buoyancy may be returning, possibly on the back of strong recent employment growth, with the unemployment rate falling to a 42 year low.
‘However, wage growth is still lagging increases in consumer prices, which is likely to add pressure on household finances and increase affordability challenges for some buyers.
‘House prices should continue to be supported by low mortgage rates and a continuing shortage of properties for sale over the coming months.’
Halifax’s figures show that the pace of quarterly and annual house price rises have been declining for some time (top chart) while it also flagged Royal Institution of Chartered Surveyors data (bottom chart) showing a decline in the number of homes for sale
Monthly house price index figures are volatile and Halifax’s data showed that over the past three months prices had risen by 0.1 per cent.
Questions continue to be raised over the health of the property market, with homes only having been more expensive compared to wages at the peak of the 2000s boom.
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Against this backdrop, record low mortgage rates are credited with keeping the property market moving, however, greater constraints now exist on how far banks and building societies can go in extending bigger loans to home buyers.
Unless lenders continue to slash rates, those restrictions will ultimately cap the effect that cheap mortgages will have on raising prices.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: ‘Before we get too carried away by the numbers it is worth remembering that house-price growth is being underpinned by a shortage of supply, including housebuilding, historically low mortgage rates and relatively low unemployment, rather than strong buyer demand.
‘Fewer transactions are taking place where affordability has been most stretched due to lack of new and existing stock, such as in London – and inflation higher than wage growth.
‘The short-term impact of Brexit on the housing market was probably overestimated but the longer term effects may have been underestimated.
‘However, now that the government is negotiating the UK’s exit from the EU, further uncertainty seems inevitable until the final outcome becomes clearer.’