10th September 2015
House prices surged 2.7% month-on-month in August driving the annual rate of inflation up to 9%, according to the latest numbers from Halifax.
The annual rate of growth highlighted a strong rebound given prices dipped to 7.8% in the three months to July, from 9.6% in the three months to June
But lender’s data flies in the face of recent figures from Nationwide, which reported that prices rose by a far more modest 0.3% over the month, taking the annual rate to 3.2%.
Despite the disparity between the two surveys IHS Global Insight’s chief UK and European economist Howard Archer is lifting his house price growth forecast to 7% for 2015, up from 6%.
While he currently anticipates that prices will increase by approximately 6% in 2016, he asserted the there is “a significant upside risk to these forecasts” given the shortage of houses on the market.
He said: “We do expect house prices to see solid increases over the coming months. Latest data and survey evidence largely indicate that housing market activity is on the up, and we suspect it will be supported over the coming months by largely helpful fundamentals, notably including stronger earnings growth, high employment, elevated consumer confidence and still very low mortgage interest rates.
“Meanwhile, a limited stock of properties for sale is clearly exerting upward pressure on house prices.”
The latest data and survey evidence overall indicates that housing market activity in the UK is on the up. The Bank of England reported that mortgage approvals for house purchases rose to a 17-month high in July to 68,764 from 67,069 in June and 64,971 in May. This was up 16.4% from the November 2014 low of 59,100. Additionally, the latest RICS survey shows that buyer enquiries rose for a fifth successive month in August.
However Archer noted that costs may be constrained as a result of more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the likelihood that interest rates will soon start rising gradually.