According to the latest Nationwide house price index, as annual house price growth edged up from 3.3% in June, the lender said there could be signs house price growth was ‘stabilising’ closer to the rate of earnings. The annual growth rate of total pay rose to 3.2% in the three months to May 2015.
House prices saw a monthly change of 0.4% in July, with the cost of the average UK property rising to £195,621.
Nationwide chief economist Robert Gardner said: “After moderating over the past twelve months, there are tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%.”
While Nationwide said outlook on the demand side ‘remained encouraging’, both lenders and commentators raised concerns about the supply of property currently available.
“House prices are increasing beyond the reach of many aspiring homeowners as demand continues to exceed supply. Prices will continue to grow as potential buyers rush to invest before an increase in interest rates, which the MPC hinted at last month,” said Jeremy Duncombe, director of Legal & General’s Mortgage Club.
“Worryingly, this is likely to result in house prices rising at a faster pace than increasing wages and low inflation can compensate for. This will, in turn, price many people out of the market, ruling out the dream of homeownership for many looking to buy. This trend will become increasingly severe in the remainder of the year as heightened demand will see more people competing for fewer properties.”
The data revealed that changes to Stamp Duty Land Tax introduced in the Autumn Statement last year had noticeably reduced the impact of ‘bunching’ of transactions around key property price points.
Under the changes implemented by the Chancellor, the old slab structure was abolished and replaced with a new band structure.
Gardner added: “Even though the change to SDLT only came into effect six months ago, the impact on the pattern of transactions is already evident, with much less bunching of transactions around the £125,000, £500,000 and in particular the £250,000 price points.
“On balance (considering the net effect of those paying more and those paying less), we estimate that the changes have resulted in around £275m less tax being paid than would have been the case under the old stamp duty regime.”
