UK average house prices rose 0.4 per cent in July taking the annual pace of change up to 3.5 per cent, according to one of the major price indices.
The Nationwide says that after moderating over the past 12 months, there are “tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around four per cent” according to a building society spokesman.
“This would bode well for a sustainable increase in housing market activity, though whether this will be maintained will depend on whether building activity can keep pace with increasing demand” he says.
Nationwide says the overall outlook on the demand side remains encouraging.
Jobs growth has remained relatively robust in recent quarters and, after a prolonged period of subdued growth, wage growth is also edging up. “With consumer confidence buoyant and mortgage rates still close to all-time lows, demand for housing is likely to firm up in the quarters ahead” says the society.
But it warns that is remains unclear whether activity on the supply side will catch up with demand.
“The number of new homes under construction has started to pick up, albeit from historically low levels, and further increases are required if a sustainable recovery in the housing market is to be maintained over the longer term.”