Shares in housebuilders rose on Wednesday after data showed that UK house prices rebounded in July after a fall in June, helped by a continued increase in buyer demand over the year so far and the supply of homes on the market rising to a seven-year high.
The house price index from property website Zoopla showed a 20% jump in buyer demand and a 23% leap in sales agreed so far in 2024.
House prices are up 1.4% over the first seven months of the year so far and by December, the index suggests house prices are on track for a 2.5% increase since the start of the year.
However, compared to 12 months earlier, the rate of growth in July is only 0.5%, as prices fell over the latter part of 2023.
These changes in the market were before the Bank of England cut interest rates by a quarter of a point at its 1 August meeting, though mortgage rates have been edging lower in anticipation.
The average mortgage on a two-year fixed-rate deal has dropped from 5.97% at the end of June to 5.58% now, according to research from Moneyfacts.
Sellers should be careful about how they price their house in the current market, however, as Zoopla found one in five homes are taking cuts of at least 5%, with "incorrectly priced" properties taking over twice as long to sell.
As for supply, the average estate agent listing homes for sale on Zoopla has 33 homes for sale unsold, and a seven-year high.
"Momentum in the sales market continues to build as mortgage rates drift lower and more and more sellers gain the confidence to list their home for sale. Buyers have much greater choice which will support sales numbers, but this will keep prices rises in check," said Zoopla director Richard Donnell.
Following the release of the data, shares in housebuilders rose slightly, with Crest Nicholson seeing the largest reaction, rising 1.2%, Persimmon PLC (LSE:PSN) was up 0.9% and Berkeley Group Holdings PLC (LSE:BKG) inched up 0.5%.
Daniel Austin, CEO of property lender ASK Partners, said the month-on-month rise in house prices "is hopefully the sign of an upward trend developing for the rest of the year. The market certainly appears to be showing signs of resilience.
"Everyone is waiting in anticipation of what the new government will do to drive construction of new homes and unlock the planning system, and it is likely that initiatives announced in the coming months will give the market a further boost."
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: "There’s plenty to cheer in this data, with house prices up 1.4% since the beginning of the year, buyer demand booming and more sales being agreed.
"The Bank of England interest rate cut has boosted sentiment significantly and helped persuade buyers that now is a decent time to get stuck in. It didn’t have a dramatic overnight impact on average mortgage rates, but they’ve continued drifting southwards, and the fact they’ve been falling for a couple of months is starting to really add up."
*** Update: Adds housebuilder share prices, expert comments ***