UK house prices rise in August but set for Brexit slump, economists warn

Latest house price figures defy several indications of imminent downturn

Several indicators have pointed to a downturn but Nationwide says prices are continuing to rise (Reuters)

House price growth accelerated in August but economists warned of a "cloudy" outlook.

The month is considered a slow one by estate agents as buyers and sellers jet off for summer holidays, and a post-referendum slump had been predicted, but prices continued to march upwards, rising 0.6 per cent.

Over the last year prices jumped 5.6 per cent, a quickening of the pace from 5.2 per cent in the 12 months to July.

The figures appear to fly in the face of a series of recent signals that the market is slowing.

On Tuesday the Bank of England said the number of mortgages approved had slumped to an 18 month low in July.

In the same month, estate agents reported a “significant” drop in numbers of enquiries from new buyers - the fourth consecutive monthly fall. Thirty-six per cent more respondents reported a drop than an increase - the lowest reading since the middle of the financial crisis in 2008.

Continued high prices are more likely to be result of chronically low supply than a vote of confidence from buyers said Robert Gardner, Nationwide's chief economist.

“Decline in demand appears to have been matched by weakness on the supply side of the market. Surveyors report that instructions to sell have also declined and the stock of properties on the market remains close to thirty-year lows.

“Manufacturing, services and construction sectors all slowed sharply in July, and, if sustained, this is likely to have a negative impact on the labour market and household confidence,” Gardner said.

The Nationwide survey uses mortgage lending figures at the approval stage, meaning that lack of confidence in the market can take time to translate into falling numbers in the index.

The Bank of England’s interest rate cut last month is expected to provide a temporary boost to the housing market as mortgage costs fall, but many economists predict a downturn in the housing market is around the corner.

“We believe housing market activity is likely to be limited over the coming months, and prices will weaken as prolonged uncertainty following the UK's vote to leave the EU constrains consumer confidence and willingness to engage in major transactions,” said Howard Archer, chief UK economist at IHS Global Insight.