UK Residential Market Update: July 2017

Key facts July 2017

• UK house prices rose by 1.1% in June, taking the annual increase to 3.1%, up from 2.1% in May
• Average values of existing properties in prime central London were unchanged in June, taking the annual change to -6.3%, from -6.6% in May, amid rising activity
• Prime country house prices were flat in Q2, but activity levels in this market are also rising
• Values in the prime Scottish market slipped 0.2% in Q2 and are down 0.9% on the year, although values in Edinburgh are up 3.7% in the year to June 2017

Economic and housing market overview

The Bank of England’s rate-setting committee has a big decision to make in August. There has been much speculation that, amid rising inflation, the central bank may move to raise interest rates as it publishes its quarterly Inflation Report.

Even if rates rise by a quarter point, they will still be near record-lows at 0.5%. However, it will mark the first rate rise in around a decade, and will likely have some impact on sentiment as well as mortgage repayments.

The Bank’s hand may be stayed by recent data from the UK economy, which suggests that the growth in output has been slowing since the beginning of the year, amid concerns over Brexit negotiations and the more recent General Election result.

Ultra-low mortgage rates are one of the factors putting a floor under pricing in the housing market at present. While house price growth is slowing on the whole, albeit with a tick-up in June, according to Nationwide, there are still large regional variations.

The housing market is characterised by constrained activity at present, as uncertainty over the country’s economic path and the increased burden of property taxes in some parts of the market weigh on transactions. However, low mortgage rates and a lack of homes coming onto the market for sale are acting as firm anchors for pricing.

Prime market update

Across the prime markets, there is evidence that demand is picking up, although this is not translating into price rises across the board. Average values for prime property in central London remained flat in June, but this was accompanied by a pick-up in activity. 

Across the rest of England, activity also rose in the prime market, with sales volumes rising by more than a half between April and May compared to the same period in 2016, and by 29% compared to sales in April and May in 2015.

Read the full UK Residential Market Update.