Property prices are likely to rise further due to the lag in construction activity strengthening demand, Nationwide has predicted.
House prices went up 0.3% in January, with growth set to continue in the coming months, according to the Nationwide monthly house price index.
The average price of a property was £196,829, up from £188,446 a year ago. House prices were 4.4% higher than this time last year, just down on December’s figure of 4.5%.
Nationwide said that there was likely to be a modest acceleration in house price growth on the back of a strong jobs market combined with wages increasing at a healthy rate.
This trend is expected to continue and along with interest rates remaining on hold, Nationwide expects the demand for homes to strengthen in the months ahead.
“The concern remains that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability. Indeed, the market is already characterised by a shortage of stock, with the Royal Institute of Chartered Surveyors reporting that the number of properties on estate agents’ books remains close to all-time lows,” said Robert Gardner, Nationwide’s chief economist.
The latest statistics from the British Bankers’ Association show that gross mortgage borrowing was £12.4 billion in December, 24% higher than the previous year.
Overall new borrowing last year was 6% higher than in 2014, while remortgaging was up 31%.
Richard Sexton, director of chartered surveyor e.surv, said: “Mortgage lending grew significantly over the course of last year, but two main drivers of the gross total – remortgaging and buy-to-let – have challenges in 2016 as some speedbumps are fast approaching. The rental sector will soon be coming face-to-face with extra taxes and Mark Carney signalled yesterday that the Bank of England may further step-in to cool buy to let loans if necessary.
“Meanwhile for remortgaging, many households have already locked in to lower mortgage rates, and the consensus view appears to be struggling to conceive of rates falling much lower in the immediate future.
“House purchase lending is also now much healthier than a year ago, but supply continues to constrain the number of people that can move home or buy for the first time. There is momentum in the home movers market, but that could start to cool if people can’t find the homes to move into or purchase. So sellers urgently need to be convinced to come to market to avoid losing this momentum.”
