Comments from Nationwide
The annual house price growth has moderated to 2.1% in August, from 2.9% in July, reports have shown. These figures are the latest amid fears that Brexit-fuelled inflation is placing pressure on household spending.
These figures are somewhat confusing; following from the ongoing strength of the labour market – which created 125,000 jobs in the three months leading up to June and thus causing the unemployment rate to fall to 4.4% – the lowest rate for over 40 years.
The pressure on households
It seems that the problem that many of us have been anticipating has become a reality – wages are not able to keep up with the actual cost of living. Whilst throughout the UK the measures of housing affordability aren’t particularly stretched, it is obvious that some regions are struggling more than others – namely London and the South of England.
Commenting on this, Robert Gardner, Nationwide’s Chief Economist, said:
“Ultimately, housing market developments will depend on wider economic performance. The UK economy slowed noticeably in the first half of the year, and there has been little to suggest a significant rebound in the months ahead. While employment growth has remained robust, household budgets are under pressure. This suggests that housing market activity will remain subdued.”
However, prices are predicted to rise by around 2% over this year as a whole due to a number of factors. One of which is the overall stock of homes on estate agents’ books still remaining close to 30-year lows, and the number of new homes coming onto the market throughout this year continuing to be subdued.
Stamp duty revenues have reached all-time highs in cash terms, even reaching £12.8bn in the 12 months to mid-2017. This is well above the £10.6bn peak that was recorded in 2007, and whilst it is surprising, the rise in house prices are part of the explanation. Overall UK prices are 12% above the peak recorded in 2007, with prices in London, the outer metropolitan and outer South East regions significantly higher.
Commenting on these figures, Robert Gardner stated:
“This is important because these regions contribute significantly more than their par share of stamp duty revenues as house prices are well above the UK average. For example, in 2007, London and the outer metropolitan regions accounted for 25% of housing transactions, but an estimated 50% of total stamp duty revenues in England and Wales.”