House prices rise more than expected in July, slight growth seen in 2017

UK house price growth held up better than expected in July, according to the results of one of the most widely-followed surveys for the sector.

Nationwide's house price index rose by 0.3% month-on-month to 418.5, while the year-on-year rate of change in prices slowed from 3.1% to 2.9%.

Economists had pencilled in a dip of 0.1% versus June and an annual rate of gains of 2.6%.

Meanwhile, in non-seasonally adjusted terms the average price of a home in Britain rose from £211,301 in June to £211,671 last month.

The data might appear to be at odds with the number of housing transactions and of mortgage approvals for house purchase running at eight and nine-month lows, respectively, said Nationwide chief economist Robert Garder.

But tepid demand was being more than made up for by the reduced number of properties coming to market even as the number of homes on estate agents’ books approached its lowest level in 30 years, he said.

Looking ahead, Gardner forecast that "housing market activity is likely to remain subdued, with the balance in the market shifting a little further towards buyers in the quarters ahead."

He expected house price growth of roughly 2% in 2017, which was just outside the 3% to 6% range seen over the past two years.

“While employment growth has remained relatively robust, household budgets are coming under pressure as wage growth is failing to keep up with the rising cost of living," he added.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics concurred: "looking ahead, however, we still expect mortgage rates to stabilise, employment growth to moderate and consumers’ confidence to remain depressed, ensuring that house prices rise only modestly in the rest of this year."