House prices grow in July but too early to tell Brexit impact, says Nationwide

The Nationwide building society price index showed that house prices increased by 0.5% month-on-month in July, above the consensus 0.0% and compared to June's 0.2% monthly increase.

The annual price growth rose slightly to 5.2% from 5.1% in June, above the consensus 4.5%.

Nationwide’s July monthly index increased to 406.3 from 404.4 last month.

The average house price in the UK was £205,715 in July.

The data from the Nationwide was the first month since the European Union referendum on the 23 June. The building society said the data was from the mortgage offer stage, so any impact from the UK’s decision to the leave the EU will not be evident from July’s numbers, as there is a short lag between deciding to buy a property to applying for a mortgage.

This was echoed by Pantheon Macro economist Samuel Tombs who said Nationwide's index diverged from other more downbeat housing market surveys due to timing.

“Mortgage applications usually lag decisions to buy a home, and there is a further delay between applications and approvals. In addition, a higher than usual proportion of mortgage applicants who had loans approved may cancel planned transactions due to less certain prospects for employment and wages since the referendum.

“The pick-up in July’s Nationwide index therefore probably isn’t a sign that the housing market will weather the economic slowdown comfortably”.

Nationwide's chief economist Robert Gardner said: “It will be tempting for commentators to assign any trends in the coming months to the impact of the referendum.

"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, which took effect in April. Determining how much of any fall-back in activity is the result of the tax changes and how much is due to the referendum will be difficult."

Before the EU referendum, the Royal Institute of Chartered Surveyors (RICS) reported a decline in new buyer enquiries and surveyors expected weak price growth, which also could have been affected by recent tax changes.

Gardner said economic uncertainty could lead to weak housing demand as household confidence fell sharply in the wake of Brexit, especially towards major purchases.

He also said it depends on how the labour market evolves which will determine the demand for homes in the future, and it was encouraging that unemployment was at a 10-year low in the three months to May. The decline in long term interest rates to new all-time lows should keep borrowing costs low.

“The outlook for the housing market remains unusually uncertain and it may take several months for the underlying trends in the market to become evident.”