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August 02, 2017
The latest Nationwide house price index emerged earlier today. It showed, once again, how weak supply has galloped to the rescue of house prices.
Prices in July rose by 0.3%, according to the Nationwide, while the annual rate of growth fell to 2.9% from 3.1%. In the words of Robert Gardner, its chief economist:
"A lack of homes on the market appears to be providing support [for house prices], with annual house price growth remaining only just outside the 3-6% range that has been prevailing for most of the past two years.
In short, while demand is down at a time of economic and political uncertainty, the shortage of homes, both for sale and being built, is preventing prices from falling sharply.
There's little doubt in my mind that the prospect of the first interest rate rise for many years, and the potential fallout that will ensue when it happens, is causing many households to err on the side of caution.
Stubbornly high inflation and low wage growth are also having a negative impact on demand. When household budgets are under pressure, major commitments like buying a home are often put on the backburner.
And while record low mortgage rates are helping what demand there is, it's hard to see anything other than a sideways moving market for the rest of 2017.
The Nationwide suggests that prices for 2017 as a whole will come in at circa 2% and that's probably not a bad estimate. In the current climate, it's unlikely demand will increase sufficiently to drag the market out of its rut.
But to end on a positive note, better a sideways moving market than a downwards moving one.
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