3rd March 2016
The property market is showing no signs of easing as the latest numbers from Nationwide highlight that the annual rate of house price growth hit a 10-month high of 4.8% in February, up from 4.4% in January.
Prices edged ahead by 0.3% month-on-month, matching January’s total, after increasing by 0.8% in December according to the lender.
Commenting on the figures, Robert Gardner, Nationwide’s chief economist, said that much of the increase is likely to be related to the impending increase in Stamp Duty on second homes which is due to take effect in April 2016
“This is likely to have brought forward a significant number of purchases, which in turn will probably result in a fall back in approvals during the spring/summer.
“Looking through this volatility we expect the underlying pace of activity to increase in the quarters ahead as improving labour market conditions and low borrowing costs provide ongoing support.”
Howard Archer, chief UK and European economist at IHS Global Insight anticipates that house prices will rise by around 6% over 2016 “amid reasonably healthy buyer interest, which could well be fuelled by increased expectations that interest rates will not rise this year and a relative shortage of properties”.
Elsewhere the latest data from the Bank of England show mortgage approvals for house purchases jumped to a two-year high in January with reports from the British Bankers Association and the Royal Institution of Chartered Surveyors indicating that is being influenced by buy-to-let investors and second home buyers looking to make a purchase before April’s rise in Stamp Duty.
Archer highlighted that this backdrop could however exert upward pressure on property prices in the near term.
But he added that the vote on European Union membership on 23 June could be a potential major downside risk to housing market activity.
“A vote for Brexit would be liable to see a marked hit to UK economic activity over the rest of this year and in 2017 amid heightened uncertainties, which would likely weigh down heavily on the housing market,” he said.
Notably however Nationwide’s house price measure has been weaker than most other reports. At the top end, latest data from the Halifax show that house prices were up 9.7% year-on-year in the three months to January, which was more than double the rate for January reported by the Nationwide.