Last month all the headlines were about three months of falls in Nationwide’s House Price Index. This month they are all about a bounce back – a 1.1% rise reversing the previous falls. Rightmove’s index, in contrast, showed signs of healthy growth in May (+1.1%), but in June it dipped into negative territory (-0.4%).
Robert Gardner, Nationwide’s Chief Economist, says:
”At this point it is unclear whether the increase in house price growth in June reflects strengthening demand conditions on the back of healthy gains in employment and continued low mortgage rates, or whether the lack of homes on the market is the more important factor.”
Whereas Miles Shipside, Rightmove director and housing market analyst concentrates on other issues:
“It now seems certain that we will have continuing political uncertainty, which the housing market traditionally dislikes, and with the first fall in June prices for eight years there is no doubt that the lack of stability is a factor.”
So what is going on? And who’s right?
The answer is both of them. The upheavals caused by Brexit and the snap election have created a climate of uncertainty and, as Miles Shipside points out, the housing market tends not to like uncertainty.
It means both buyers and sellers are acting more cautiously and with each new piece of news, confidence can bounce up and down, especially in the very short term. Most commentators consider the quarterly and annual housing figures to be far more reliable indicators of trends.
As was reported last month, when you look at those longer term trends, you can see that prices are rising, albeit slowly. The most recent annual figures range between +2% and +4%, a rise which is almost certainly attributable to ultra low mortgage rates and supply shortages.
As ever, it’s not a universal story, because the property market is made up of thousands of micro markets. Some sectors are doing far better than others; first time buyers (FTBs), for example, after years in the doldrums are now the fastest growing sector – the number of FTB sales were up 3.3% last month and by 5.5% annually (Source: Rightmove). The number of sales in the North rose by 11% over the last 12 months, compared to 7% in the South. In London the number of sales fell by 2.4%.
Looking ahead, it’s likely that we will see more month-to-month fluctuations, at least until we get some clarity over the kind of relationship we’ll have with Europe in the post Brexit world.