A fall in construction activity will serve to increase house prices still further, according to Nationwide.
The building society noted that prices continue to increase during January, but that any rises will be modest.
Gradual
Prices are up 0.3% during this month, in comparison to a sharper increase of 0.8% recorded in December. Annual growth is more stable, standing at 4.4%, in comparison to 4.5% in the previous month.
In fact, the average property value is currently £196,829, slightly down on that recorded in December.
However, Nationwide warns that the demand for property is likely to increase over the coming months. The firm believes that a strong labour market, in conjunction with wages rising at a steady pace and interest rates remaining static, will drive the upturn.
Fall in construction ‘will raise property prices’
Concerns
‘As we look ahead, the risks are skewed towards a modest acceleration in house price growth, at least at the national level,’ said Robert Gardner, chief economist at Nationwide. ‘The labour market appears to have significant forward momentum. Employment has continued to rise at a robust rate in recent months and, while the pace of earnings growth has slowed somewhat, in inflation-adjusted terms regular wages continue to rise at a healthy pace.’[1]
‘The concern remains that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability,’ he continued. ‘Indeed, the market is already characterised by a shortage of stock, with the Royal Institute of Chartered Surveyors reporting that the number of properties on estate agents’ books remains close to all-time lows.’[1]
Adrian Whittaker, Sales Director at New Street Mortgages, also noted, ‘these figures show an unseasonal increase in house prices resulting from a market that is characterised by rising demand and limited supply. The mortgage industry has been slow to keep up with a new technology and if we are to satisfy the demand for faster mortgage applications and adapt to the rising competitiveness of the market, it is crucial that as an industry, we look to keep systems and processes up to date.’[1]
[1] http://www.propertyreporter.co.uk/property/nationwide-predicts-modest-acceleration-in-house-price-growth.html