House prices in the UK increased by 0.6% in August and are now 5.6% above a year ago, according to the latest index figures to be published.

This continued growth takes the average price of a home to £206,145, the data from the Nationwide shows, indicating that an expected fall due to Brexit has not yet materialised.

The pick up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months, according to Robert Gardner, Nationwide’s chief economist, saying that this includes a softening of new buyer enquiries to the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum. Meanwhile, the number of mortgages approved for house purchase fell to an 18 month low in July.

‘However, the decline in demand appears to have been matched by weakness on the supply side of the market. Surveyors report that instructions to sell have also declined and the stock of properties on the market remains close to 30 year lows,’ Gardner explained.

‘This helps to explain why the pace of house price growth has remained broadly stable. What happens next on the demand side will be determined, to a large extent, by the outlook for the labour market and confidence amongst prospective buyers,’ he pointed out.

He believes that it is encouraging that the unemployment rate remained at a 10 year low in the three months to June, though labour market trends tend to lag developments in the wider economy and it is also positive that retail sales increased at a healthy rate in July, up almost 6% compared to the previous year, even though consumer confidence fell sharply during the month.

‘However, business surveys suggest that the manufacturing, services and construction sectors all slowed sharply in July, and, if sustained, this is likely to have a negative impact on the labour market and household confidence,’ he said.

‘Most forecasters, including the Bank of England, expect the economy to show little growth over the remainder of the year. Indeed, these concerns prompted the Bank’s Monetary Policy Committee (MPC) to implement a range of stimulus measures at the start of August, which will provide support to economic activity and the housing market. Monetary policy measures will provide some support for households and the housing market,’ Gardner commented.

‘The MPC’s decision to lower UK interest rates from 0.5% to a new low of 0.25% will provide an immediate benefit to many mortgage borrowers, though for most the boost will be fairly modest. The MPC’s stimulus measures will also provide indirect support to the housing market, and not just by boosting wider economic activity,’ he added.

According to Nicholas Finn, executive director of Garrington Property Finders, the data reveals a property market that is still unsettled rather than upbeat. ‘On the front line we’re seeing some strong intent but a lack of clarity among buyers. The cut in interest rates and resilient levels of consumer confidence mean there are some determined buyers, especially among those who sat on the fence in the run-up to the Brexit vote,’ he said.

‘There’s a growing sense that this is a buyer’s market with the more bold frequently asking for substantial discounts but many are still being cautious as the dust has yet to settle. August is traditionally a slow month among buyers, but as the summer lull ends there is a good chance that momentum will pick up,’ he explained.

‘Crucially, sellers have battened down the hatches rather than abandoned ship. Price growth has eased, and among the top tiers of the market, prices have returned to more genuine market levels. Buyers who had been waiting for the post-Brexit slump to bottom out should act fast, or they risk missing the boat,’ he added.

Russell Quirk, chief executive officer of eMoov, believes that the housing market is in a stronger position than it was in August 2015 and he believes that with the school holidays now over the market will kick it up a gear in September.

Even more optimistic is Rob Weaver, director of investments at property crowdfunding platform Property Partner, who thinks it is increasingly likely that the predicted collapse of the property market post-Brexit may not happen.
 
‘The property market has stood up to a strong headwind of political and economic uncertainty, and prices haven’t collapsed as many said they would after the UK voted to leave the EU. The sheer lack of supply has counterbalanced the fall in demand over the summer months,’ he said.

‘There have been seasonal, political and Stamp Duty related reasons for the fall in demand, but the extreme lack of supply has evened things out. The interest rate cut earlier in the month has given the market a confidence boost and eased any post-Brexit jitters. The jobs market has remained strong so far but its performance between now and the New Year will be crucial,’ he explained.
 
‘It’s still too early to know what the full impact of Brexit will be on the housing market but for the time being, property prices are showing a degree of resilience. If the Bank of England’s chief economist says that owning property is a better bet than a pension, that’s a vote of confidence for the stability of the property market. At the very least it reinforces how many people gravitate towards bricks and mortar in times of economic or political uncertainty,’ he pointed out.

‘Moreover, the government is readying a multi-billion pound package to support housebuilding and stimulate the economy, which demonstrates the importance of the housing market, and further strengthens its longer term prospects,’ he added.

Graham Davidson, managing director of Sequre Property Investment, also believes that continued house price growth is further proof, if needed, that the referendum announcement has done little to curb growth.

‘The market is in good health overall, boosted by the recent Bank of England interest rate drop which has helped, however modestly, those on tracker mortgages, including buy to let investors. We believe growth is being driven by key northern cities, where there are a wealth of opportunities and new projects being announced on an almost weekly basis,’ he said.