House prices are holding up across the UK ahead of the European Union (EU) referendum, according to Halifax. In its monthly house price index, Halifax said the average UK price rose by 1.4% to £213,472 over the three months to the end of May when compared with the previous quarter, a slight drop from the 1.5% growth in April. The annual rate of average house price growth was the same at 9.2%.
Concern about the impact of a potential Brexit from the EU after the 23 June referendum is paralysing some parts of the property market. Investors in central London property, both residential and commercial, are delaying transactions until after the vote when uncertainty has lifted. But for most of the housing market in the UK, it is business as usual.
"Low interest rates, increasing employment and rising real earnings, continue to support housing demand," said Martin Ellis, Halifax housing economist.
"The strength of demand, combined with very low supply, is causing house prices to rise at a brisk pace in quarterly and annual terms. Increasing affordability issues, caused by a sustained period of higher-than-earnings house price growth, should curb housing demand and result in some slowdown in house price growth as the year progresses."
Housing demand was fuelled before April by a rush of buy-to-let investors trying to beat the new tax year when Chancellor George Osborne introduced a 3% levy on top of basic stamp duty rates for purchases of additional property. As a result, Halifax said home sales dropped by 45% between March and April, from 153,700 — the highest monthly figure since records began in 2005 — to 84,300 — the lowest since March 2013.
"The resilience of house price growth is remarkable," said Ian Thomas, co-founder and director of LendInvest, an online property investment company. "Even now that the stamp duty stampede of the first quarter is behind us, and with the uncertainty of the EU referendum result dampening activity, house prices are still holding up.
"Demand continues to outpace supply, there simply aren't enough houses being built. The latest disappointing housebuilding stats make this abundantly clear. As a result, house prices will continue to rise."