House Prices Jump in August, says Halifax

Figures from the mortgage lender suggest a strong end to the summer for the housing market, which is borne out by this week's positive housebuilder results

James Gard 7 September, 2017 | 10:55AM
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House prices in the UK have risen over the month of August

UK house prices bounced back in August, mortgage lender Halifax said, defying signs of a slowdown in the housing market since the General Election. Prices of homes rose 1.1% in August month on month, compared with a month on month rise of 0.7% in July. The statistics chime with Bank of England mortgage approval figures released last week showing a strengthening in demand for new mortgages towards the end of the summer.

Jonathan Hopper, managing director of Garrington Property Finders, said: “After months of uncertainty the property market is slowly finding its feet again. The market remains deeply fragile, but the listless limbo that followed the election result is fading as increasing numbers of previously hesitant buyers are piqued into action by the sense that stability – if not quite normality – is returning.”

The August figures, the first time this year that growth has exceeded 1%, “sets the housing market up nicely for a strong end to the year”, says Alex Gosling, CEO, online estate agents HouseSimple.com.

However, one mortgage broker warned that some of the recent gains are due to first-timebuyers anticipating a rise in interest rates. Alastair McKee, Managing Director of the UK-wide independent mortgage broker, One 77 Mortgages, said that “there's a sense that the clock is ticking on rates and that is certainly a factor in the steady number of transactions.”

Housebuilder Stocks Post Strong Results

The upbeat nature of the Halifax figures also tallies with results from Britain’s housebuilders this week. Investors are used to housebuilding stocks posting strong rises in profits, sales and asking prices, and Redrow’s (RDW) results on Tuesday were no exception. The FTSE 250 company beat expectations by hiking its dividend by 70% and posting a 20% rise in revenues to £1.7 billion, a record for company.

The average selling price for a Redrow home rose by 7% on the year to nearly £310,000. The housebuilder’s shares are up around 200p from the start of the year and are trading at around 620p – the shares fell sharply to around 300p after the Brexit vote, but as with many construction stocks, have staged a strong recovery since.

Results from FTSE 100 housebuilding share Barratt Developments (BDEV) were less well received by investors because of a warning among results that sales volumes would level out this year. Like Redrow, Barratt’s profits beat expectations and announced a special dividend to return cash to shareholders. Pre-tax profits rose 12% to £765 million in the year to the end of June as the selling price of a Barratt home rose by 6% to £275,000.

Nevertheless, the company’s shares dropped 20p to 620p on the results as the company was seen to be lagging its rivals on profit margins. Persimmon (PSN) released strong results recently, as did Berkeley Group (BKG), which is joining the FTSE 100 on September 18.

Bovis Homes (BVS) also released interim results on Thursday, which were well received by investors despite a fall in profits and completions for the reporting period. Bovis has had a range of well-publicised problems this year, including complaints over build quality and problems with contractors. But investors pushed the shares up over 6% to £11.19 amid optimism that the worst is over for the housebuilder, particularly under new management. News on restructuring and cost cutting was well received by the market.

Last week the Nationwide’s figures had a different take on the UK housing market – according to Britain’s biggest lender, house prices fell 0.1% month on month in August, and year on year growth dipped to 2.1% in July.

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James Gard  is content editor for Morningstar.co.uk