Looking closer at the regional level of the UK, the highest annual growth was in the East Midlands at 7.5 per cent while the slowest annual growth was in London at 2.8 per cent in the 12 months to July 2017. This is the eighth consecutive month when house price growth in London has remained below the UK average.
Thomas Fisher, economist, PwC, said: “Regionally, house price growth continues to be weaker in London and the South East, where year-on-year growth rates in July were 2.8 per cent and 3.8 per cent respectively. Meanwhile, growth of over 7 per cent in both the East Midlands and the East of England continues to drive average house price growth up for the UK overall.
Fisher added: ““Factoring in continued pressure on household incomes in the second half of the year, we anticipate a likely weakening in UK house price inflation to around 4 per cent on average for 2017.”
Pantheon Macro chief economist Samuel Tombs even sounded a strong note of caution as to the quality of the official statistics. “Growth in the official measure of house prices is much stronger than other indicators, making us suspicious of the former’s accuracy. According to the Nationwide, Halifax and LSL/Acadata, house prices were up just 2.9 per cent, 2.5 per cent and 2.9 per cent year-over-year respectively. In theory, the official measure of prices should be the best barometer because it is based on all housing transactions, regardless of the purchase method or whether the property is new or old. But the official data often are revised substantially, as only a small sample of properties—especially for new build houses—are available for the most recent month.”
He added: “New build prices reportedly rose 17.7 per cent year-over-year in July, which we find hard to believe when prices for pre-owned properties rose by just 4.3 per cent. Never before has there been such a disparity between new build and pre-owned house price growth. As a result, we are more inclined to trust the plethora of other indicators that suggest that price growth is muted.
“Looking ahead, we expect house prices to rise only slowly over the next year as inflation continues to exceed wage growth, Brexit risk makes some households reluctant to make long-term financial commitments and as lenders’ financing costs rise when the Term Funding Scheme is closed in February 2018,” he concluded.
According to the Bank of England Agents’ summary of Business Conditions for August 2017, housing market activity has remained muted. It reported that the market for new homes remained stronger overall than the secondary market, supported by the Help to Buy scheme.