Annual house price growth rises to 9%

Prices in the latest three months (June-August) were also 3.0% higher than in the preceding three months. Again, the quarterly rate of change increased from July’s 2.5% but remained below June’s 3.3%.

On a monthly basis, house prices increased by 2.7% between July and August. This is the biggest monthly rise since May 2014 (+3.8%). Monthly movements, however, can be volatile and the quarter on quarter change is a more reliable indicator of the underlying trend, according to the index.

UK home sales declined by 4% between June and July, but remained above 100,000 for the second successive month, at 100,720. In contrast, sales were consistently below 100,000 between October 2014 and May 2015. Sales in the three months to July were 3% higher than in the previous three months.

Commenting, Martin Ellis, Halifax housing economist, said:

“The underlying pace of house price growth is strong. The shortage of secondhand properties for sale on the market is resulting in upward pressure on house prices. At the same time, economic recovery, real earnings growth and very low mortgage rates are supporting housing demand. Strengthening demand and highly constrained supply are likely to mean that house price growth continues to be robust in the short-term.”

Stephen Smith, Director, Legal & General Mortgage Club & Housing, commented:

“The increase in house prices in August compared to the same period last year shows the sheer scale of the rift between supply and demand. This imbalance is causing houses prices to climb in months that typically see less activity in the market. This trend is likely to continue in the long-term unless more houses are built so that there are enough homes available for people to buy.

"The country needs to develop a long-term solution to this issue to stop house price growth from exceeding inflation and earnings growth. The longer this continues, the more people it will push out of the market.

In essence, we need to add more cards to the deck if we are to re-shuffle housing stock and enable people to own their desired home. In order for this to happen, housebuilders must ensure that they build houses strategically, by building homes of the right size and in the right places. This would help existing homeowners, such as last-time buyers, who wish to move but are faced with a lack of suitable alternatives. In doing this, the country would not only stimulate supply, but also encourage more efficient use of current housing stock.”

Rob Weaver, director of property at residential investment platform Property Partner, added:
 
"For many people, weak supply and the resultant price growth have become an almost insurmountable barrier to getting on the property ladder. With supply so low, consumer confidence healthy and mortgage rates still at record lows, strong price growth is a trend that can only continue in the months ahead. If prices carrying on rising at this rate, even many haves will become property have-nots.
 
"House price growth in August hit its highest level in 16 months, as the number of homes being marketed fell to record low levels. Sellers are just not coming to the market and no-one really has an answer to how to tempt them back. We are in danger of seeing the days of freewheeling price growth, and we know where that ended up.
 
"There needs to be a focus on creating more supply, because without properties coming to the market, prices will continue to grow and the market will continue to become more and more volatile."