Positive sentiment, but transaction numbers are falling
House prices fell by -0.5% in August, according to Nationwide. This is the largest monthly drop since July 2012, but values remain up an average of 2% on last August. The market looked on track to overshoot our growth forecast for 2018 of 1%, but this fall brings it closer in line with our prediction.
This price fall coincided with a tempering of the exuberance seen in the RICS Survey over the last few months. A majority of surveyors had been reporting rising instructions but this was gone in July. There was a small rise in the majority reporting increasing buyer enquiries. This relatively positive view from surveyors is at odds with falling transactions volumes. There were 16% fewer house sales in June compared to June last year. The least affordable housing markets have seen the greatest falls, with transaction numbers down 27% in London. Help to Buy has been a major stimulus for new homes sales since 2013, although it accounted for only 4% of all transactions in 2017. An announcement on its future is due towards the end of the month, but rumours have emerged that it will be extended two years beyond its current end date of 2021, probably with additional restrictions for buyers.
The GfK Consumer Confidence Survey has also risen this month, reflecting the relative positivity of the surveyors. Its Personal Economic Situation measure is now at its most positive since early 2016. Despite August’s rise in the Bank of England base rate, there was no surge in remortgaging activity in the run-up to this rise, as there had been with the November 2017 hike. This is because fixed rate mortgages are currently shielding 90% of new borrowers from interest rate rises.