British house prices unexpectedly fell in August for their first monthly drop since April but the outlook for the property market is likely to strengthen, Nationwide Building Society, a major mortgage lender, said on Friday.
House prices slipped by 0.2% on the month, Nationwide said.
Economists polled by Reuters had forecast prices would rise by 0.2% from July.
In annual terms, prices were 2.4% higher than in August last year, the fastest increase since December 2022 – shortly after the “mini-budget” crisis that pushed up borrowing costs – but a smaller gain than the median forecast of 2.9% in the poll.
Robert Gardner, Nationwide’s chief economist, said the housing market remained subdued but was coping with the increase in interest rates.
“Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease,” Gardner said.
The Bank of England cut interest rates on Aug. 1 to 5% from a 16-year high of 5.25%.
Investors are assigning a roughly one-in-four chance of the BoE lowering Bank Rate by another quarter point in September but they are fully pricing a cut at its November meeting.
A survey published by Lloyds Bank earlier on Friday showed confidence in the construction sector – which includes builders of infrastructure and commercial property as well as residential developers – jumped in August by 14 points to 58%.
The Royal Institution of Chartered Surveyors said earlier this month its measure of expected sales over the next three months was the strongest since January 2020, immediately before the coronavirus pandemic struck Britain.
However, the shortage of properties on the market is likely to remain a factor supporting house prices for the medium term.
Britain’s new government has promised to speed up home-building. On Thursday, it announced the creation of a group of experts to accelerate the construction of housing schemes delayed by planning and red tape.
