28th September 2015
House prices in England and Wales rose 0.5% month-on-month in August after an increase of 1.7% in July according to the Land Registry.
However it also found that annual house price inflation in England and Wales dipped to 4.2% in August, its lowest level since November 2013, from 4.6% in July.
This is down from a 52-month high of 8.5% in August 2014 but the Land Registry’s data is based solely on completed house transactions.
IHS Global Insight chief UK and European economist Howard Archer expects house prices to see solid increases over the coming months amid firm activity.
“Given that house prices were soft in the latter months of 2014, this is likely to see annual house price inflation move higher over the coming months,” he said.
“We expect house prices to rise 7% in 2015 and then by 6% in 2016. A significant upside risk to these forecasts is currently coming from the shortage of houses on the market.”
He says activity is likely be supported by largely helpful fundamentals, such as stronger earnings growth, high employment, elevated consumer confidence and still very low mortgage interest rates.
Arhcer noted too that a strengthening buy-to-let sector is also supportive to higher house prices.
He added: “Nevertheless, the upside for housing market activity and prices is expected to be constrained by more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the likelihood that interest rates will start edging up before long.
“However, higher interest rates are unlikely to have a major dampening impact on housing activity for some time to come as the Bank of England is stressing that interest rates will only rise gradually and to a limited extent.”