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Halifax Says that House Price Rises Continue Despite UK Property Shortage

Britain’s largest mortgage lender says that house price growth throughout the UK picked up unexpectedly in August thanks to a strong labor market and a shortage of available properties.

Halifax, which is owned by Lloyds Banking Group said that the average house price was £222,293 last month, an increase of 1.1%. House price rises in the three months to August were up 2.6% compared to the year before. Annual price growth has been dropping from a March 2016 increase of 10%.

These house price rises were surprising, as other research pointed to a housing market slowdown. Affordability is a problem, as inflation has been exceeding weight growth, but the demands on household income have been evened out by low mortgage rates, low unemployment, and low numbers of available properties for sale.

Halifax managing director Russell Galley said that recent mortgage approvals figures suggest that buoyancy may be coming back, likely due to recent employment growth, as unemployment rates are currently at a 42-year low.

According to Halifax, monthly home sales in the UK have been over 100,000 for seven consecutive months. HMRC figures indicate that between June and July they reached 104,760, the highest total since March 2016.

The monthly house price index from Nationwide, the largest building society in the UK, show that property values decreased by 0.1% between July and August, lowering the yearly rate of growth  to 2.1%.

North London estate agent Jeremy Leaf, who is also a former residential chairman of the Royal Institution of Chartered Surveyors, warned against reading too much into the Halifax numbers.

Mr Leaf pointed out that house price rises were being underpinned by a supply shortage, low mortgage rates, and comparatively low unemployment as opposed to strong demand from buyers.

He suggested that Brexit’s short-term impact on the UK property market was probably overestimated but the longer-term ramifications may have been underestimated. Now that the government is arranging the terms of Britain’s departure from the EU, more uncertainty seems likely until the final outcome of Brexit becomes clearer.

Pantheon Macroeconomics economist Samuel Tombs said that the increase in house price growth should not be seen as evidence of underlying momentum. He pointed out that Halifax’s measure went up by only  0.1% on a three-month-on-three-month basis.

Mr Tombs added that the demand among buyers has recently weakened- the Royal Institution of Chartered Surveyors has reported fewer inquiries from buyers in five of the previous six months- as the real demand on wages has become more intense and consumer confidence has lowered significantly. He expected demand to deteriorate further before the end of 2017 as demands on wages become worse and lenders tighten lending criteria.

Specialists in Construction Insurance

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