The UK housing market shows signs of new momentum, with a recent Lloyds Bank survey reporting a surge in construction sector confidence. The Royal Institution of Chartered Surveyors noted that expected sales over the next three months are the strongest since January 2020. Despite this, a shortage of available properties is likely to keep house prices supported in the medium term. The new government has pledged to accelerate home-building, announcing the creation of an expert group to fast-track housing projects stalled by planning and regulatory hurdles, aiming to address the housing supply crisis.
British home prices experienced an unexpected decline in August, marking their first monthly decrease since April, according to Nationwide Building Society, a prominent mortgage lender. However, the outlook for the property market is expected to improve. Nationwide reported a 0.2% decrease in house prices for the month. Economists surveyed by Reuters had anticipated a 0.2% increase in prices compared to July.
On an annual basis, prices were 2.4% higher than in August of the previous year, marking the fastest rise since December 2022, following the 'mini-budget' crisis that drove up borrowing costs. However, this increase was lower than the median forecast of 2.9% in the poll. Robert Gardner, Nationwide's chief economist, noted that while the housing market remained sluggish, it was managing to cope with the rise in interest rates. Gardner stated that if the economy continues to recover as anticipated, housing market activity is likely to gradually improve as affordability challenges lessen.
On August 1, the Bank of England reduced interest rates to 5% from a 16-year peak of 5.25%. Investors estimate about a one-in-four chance that the BoE will cut the Bank Rate by another quarter point in September, but they are fully expecting a cut in its November meeting. In recent months, there have been indications of renewed momentum in the housing market.
A survey released by Lloyds Bank revealed that confidence in the construction sector-which encompasses builders of infrastructure, commercial properties, and residential developments-rose by 14 points to 58% in August. The Royal Institution of Chartered Surveyors reported earlier this month that its gauge of expected sales over the next three months was the highest since January 2020, just before the coronavirus pandemic hit Britain. Nevertheless, the limited supply of properties on the market is expected to continue supporting house prices in the medium term. The new British government has pledged to expedite home-building efforts. Last week, it announced the formation of a team of experts to speed up housing projects that have been delayed due to planning and regulatory issues.
In summary, British home prices saw a slight decline of 0.2% in August, marking the first monthly drop since April, despite an annual increase of 2.4%. While the housing market remains sluggish, there are signs of potential recovery as interest rates have been reduced and confidence in the construction sector has risen. Economists expect that if the economy continues to improve, housing activity may gradually pick up, aided by government efforts to expedite home-building projects. However, the limited supply of properties is expected to support house prices in the medium term.
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