The Nationwide today announced that UK house prices have increased 3.2% year-on-year to August 2015. This is the slowest increase in house prices since June 2013 although there is some confusion as an earlier Halifax report suggested prices were rising by 7.9% a year. To the naked eye these figures seem to be out of sync but the relevant parties use different “mix adjustments” when looking at the type and size of properties sold over a particular period.
Again, as we have seen so many times in recent months, some of the bears of the UK property market continue to talk down this ever popular asset class.
Is the market stabilising?
Before we look at the underlying market it is worth noting that the UK property market has performed admirably compared to its counterparts and when taking into account economic turmoil over the last few years. Some experts are forecasting a return to more traditional earnings growth based increases in property prices which could stabilise at around 4% per annum. This in itself would outstrip the current rate of inflation and offer a very stable base for the future.
What factors are impacting the market?
While many economies outside of the UK are struggling the arguments surrounding the UK economy are based on forecast increased growth. This in itself bodes well for the property market in the short to medium term together with signs that the UK labour market is finally picking up. Indeed, recently we saw an increase in average earnings, a figure which has been under intense pressure for some time.
On the whole it does seem as though the UK labour market is moving ahead, the UK economy is stable and demand for property continues to rise. As we have mentioned time and time again, one factor which is often ignored is the inability of the UK housebuilding market to keep up with demand. This is one of the reasons why the average price of UK property, as measured by the Nationwide, has now reached just over £195,000.
Take a look down memory lane
Even though many people are seemingly critical of the performance of the UK property market in the short term it is worth looking back to the troubled times of 2009 which saw an annual reduction in property prices of around 17%. This was the depths of the economic turmoil caused by the US mortgage crisis back in 2008 and while the market bounced back in 2010 a further setback in the preceding two years took some time to recover from. So even if we do see a return to “traditional” property price growth rates of around 4% per annum surely this is acceptable in the current economic climate?
The way in which the Nationwide and Halifax measure property price movements in the UK is very different and can in certain circumstances lead to diverse figures. While this can be confusing the fact remains that the UK property market is moving forward, there is still underlying confidence while many other markets struggle to maintain any forward momentum. Is this really such a disappointing performance?