House Prices To Be 'Determined By Job Market'

A report has suggested the outlook for house price growth will be determined by the health of the jobs market and wider economy following the UK's vote to leave the EU.

Nationwide Building Society (LSE: CCDS.L - news) made the comments as its monthly index measured property price rises at an annual rate of 5.1% in June - up from 4.7% in the previous month.

The average UK property was worth just under £205,000 it said.

The lender released its calculations while admitting it was tough to read the true level of demand because of the surge in activity ahead of the introduction of Stamp Duty on second homes on 1 April.

Its chief economist, Robert Gardner, said: "It will therefore be difficult to assess how much of the likely fall back in transactions in the quarters ahead is because buyers brought forward purchases to avoid additional Stamp Duty liabilities, and how much is due to increased economic uncertainty following the referendum result.

"Gauging the likely impact on house prices will be even more difficult.

"Ultimately conditions in the housing market will be determined by conditions in the wider economy, especially the labour market."

While most economists agree that uncertainty arising from the EU vote will have a short term impact on investment and hiring, much will depend on the outcome of negotiations with Brussels.

A factor behind past price growth has been a shortage of homes failing to match high demand.

One builder, Redrow (LSE: RDW.L - news) suggested earlier this week that a "chronic shortage" of new housing in the UK would underpin trading but Nationwide (LSE: NBS.L - news) argued it was too early to predict the effect of the EU vote on the economy.

Stock market investors had rushed for the exit doors of housebuilders once the vote to leave was known - fearing a big hit to the housing market.

Mr Gardner continued: "The lack of homes on the market – with estate agents continuing to report a record low number of properties on their books – will also provide underlying support for prices even if demand softens."

He added that low borrowing costs would continue to help the market.

Nationwide said the outlook for London was "particularly difficult to assess" because landlords and overseas buyers have such a wide role in the capital.

But its report showed that the North/South house price gap in England had widened to a new record high of almost £169,000 in June.

It measured the gap between property values in the South and North of England had increased by £24,000 in the last year alone.