House price growth picked up in August, suggesting the slowdown in the market is easing following uncertainty over the election and Brexit vote.
According to the latest Halifax House Price Index, monthly house prices edged up by 1.1% during August following a 0.7% fall in July – the biggest jump since December 2016.
This took the average price of a property up to £222,293.
Annual house price growth rose by 2.6% in August, up from July’s figure of 2.1%.
On a quarterly basis property prices were 0.1% higher than in the previous three months.
Despite the rise, growth is down from a peak of 10% in March 2016 when transactions grew sharply ahead of the introduction of new higher stamp duty tax rates for buy-to-let and second homes that came into effect in April.
The lender said that the growing squeeze on household finances and sluggish wage growth were reducing affordability for buyers.
Russell Galley, managing director at Halifax Community Bank, said: “Recent figures for mortgage approvals suggest some buoyancy may be returning, possibly on the back of strong recent employment growth, with the unemployment rate falling to a 42-year low.
“However, wage growth is still lagging increases in consumer prices, which is likely to add pressure on household finances and increase affordability challenges for some buyers.”
The chronic undersupply of homes combined with record low mortgage rates are currently supporting the market, driving prices further upwards.
“House prices should continue to be supported by low mortgage rates and a continuing shortage of properties for sale over the coming months,” said Galley.
According to the latest Nationwide house price index, annual house price growth fell from 2.9% in July to 2.1% in August.
The Bank of England said last week that mortgage approvals unexpectedly jumped to a 16-month high in July.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Before we get too carried away by the numbers it is worth remembering that house-price growth is being underpinned by a shortage of supply, including housebuilding, historically low mortgage rates and relatively low unemployment, rather than strong buyer demand. Fewer transactions are taking place where affordability has been most stretched due to lack of new and existing stock, such as in London – and inflation higher than wage growth.
“The short-term impact of Brexit on the housing market was probably overestimated but the longer term effects may have been underestimated. However, now that the government is negotiating the UK’s exit from the EU, further uncertainty seems inevitable until the final outcome becomes clearer.”
Samuel Tombs, chief economist at Pantheon Macroeconomics, said August’s pickup in the Halifax measure of house prices should not be mistaken for underlying momentum.
“Halifax’s measure rose by just 0.1% on a three-month-on-three-month basis and it has only just exceeded December’s prior high-point.
“House purchase demand undeniably has weakened recently—RICS has reported falling new buyer enquiries in five of the last six months—as the real wage squeeze has intensified and consumer confidence has deteriorated. We expect demand to weaken further before the end of this year as the real wage squeeze worsens and lenders follow through on plans to tighten lending criteria.”
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