The latest set of Nationwide house price data showed a rise in residential property prices to the tune of 0.5% on a month-on-month basis in June, beating the consensus forecast for 0.3%.
The year-over-year growth rate decreased to 2.0%, from 2.4% in May, but again the number exceeded the consensus forecast for a rise of 1.7%. Despite the beat, the number represents a five-year low in June and “is another milestone in the housing market’s slowdown,” says Samuel Tombs at Pantheon Macroecnomics.
On current trends Pantheon say the year-over-year rate will slow further, given that month-to-month gains in the first half of 2018 have averaged just 0.1%.
Note too that Rightmove’s measure of online asking price rose by just 1.7% year-over-year in June, while the balance of surveyors expecting prices to rise over the next three months was its lowest since the referendum in May, according to RICS.
“Slowing growth in prices largely reflects the impact of recent increases in mortgage rates on affordability. Tight supply, a healthy labour market and a continued lengthening of mortgage terms—30 year loans now are common—will help to prevent prices from falling outright. But it is inevitable that house prices will grow at a slower rate than households’ incomes during a period of rising mortgage rates,” says Tombs.
There was no notable reaction in Sterling to the data.
“Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates,” says Robert Gardner, Chief Economist with Nationwide.
Concerning the outlook, Gardner says there are few signs of an imminent change. “Surveyors continue to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent.”
Pantheon Macroeconomics meanwhile expect the MPC to provide the housing market with some relief by passing over the opportunity to raise Bank Rate in August, though they join markets in assuming the decision will be a close call.
“The MPC is committed to a tightening cycle and we see two rate hikes coming in 2019. As such, we expect the official measure of house prices to rise by just 1.5% over the course of 2018 and a mere 2.0% over 2019,” says Tombs of Pantheon’s forecast for UK house prices.
Source: Pound Sterling Live