Nationwide: House prices up 0.5% in July as Brexit impact uncertain

UK house prices grew by 0.5% in July, giving an annual house price increase of 5.2% since July 2015.

The Nationwide house price index suggests the impact of Brexit has been limited in the first month following the UK’s vote to leave the EU, though Nationwide stressed “any impact from the vote may not be fully evident in July’s figures.”

The average house price has gone past £205,000 for the first time, according to Nationwide, reaching an average value of £205,715, a 0.5% increase on June.

However, the lender warned that the housing market is in an “unusually uncertain” condition, and it may take several months to be able to clearly see what the underlying trends are.

The actual trend is further skewed by the impact of the stamp duty increase in April for second home buyers, including buy-to-let investors.

Nationwide use data from the mortgage offer stage, and there is a short time lag between a buyer making a decision to purchase a property and applying for a mortgage. Therefore most of the data would have been collected before the Brexit vote. However, Nationwide cautioned analysts about using Brexit to justify the figures.

Robert Gardner, chief economist at Nationwide said: "Housing market transactions were always likely to soften over the summer after the surge in activity in March, as buyers brought forward purchases of second homes to avoid the stamp duty levy.

"Household confidence fell sharply in the wake of the referendum result, especially attitudes towards making major purchases, which in the past has correlated with mortgage activity, though less closely in recent years.

Mr Gardner said demand for homes in future months depends on how the jobs market develops.

He said: "It is encouraging that conditions were robust in the run-up to the vote, with the unemployment rate falling to a 10-year low in the three months to May. The decline in long-term interest rates to new all-time lows in recent weeks should also help to keep borrowing costs low and provide some support for demand."

Nationwide said that even if there is a drop in demand due to economic uncertainty, it is not clear how this will impact on house prices because potential sellers may sit tight and wait for the market to improve. This would keep the stock of houses on estate agents’ books low, and could be a further factor in pushing prices higher.