In July, UK house prices went up, with the average property now costing £298,237. The annual growth rate is at 2.4%, a small decrease from 2.7% in June. This marks the largest monthly increase since the start of the year. Halifax notes that while the national average is close to its peak, prices vary widely by region, affected by factors such as location and property type. Even though potential homeowners face challenges, lower mortgage rates and rising wages are slowly making homes more affordable.

Resilience in the Housing Market

Thanks to more flexible affordability checks, the housing market is showing resilience and stable activity. House prices are expected to see modest increases as the year goes on. Recent housing data indicates a stable market but not one poised for a dramatic change. With steady price growth and improved affordability, the extreme fluctuations seen in housing stocks during 2022 and 2023 likely won’t happen again soon. This suggests we should focus on strategies that benefit from low volatility in the coming weeks. This stability is also evident in broader economic data. Recent numbers from the Office for National Statistics reported wage growth at 5.1% for the last quarter, continuing to surpass the latest CPI inflation figure of 2.9%. This supports gradual improvement in buyer confidence without triggering inflation that could force the Bank of England to react.

Market Predictability

Comparing now to the chaos after the 2022 mini-budget, today’s market behavior is much more predictable. The earlier swings in housebuilder valuations due to changing interest rates are gone. For traders, expecting a sharp rally in property stocks might not be realistic. Given this outlook for modest gains and reduced volatility, selling options could be a smart move. We might consider selling covered calls on housebuilders like Taylor Wimpey and Barratt Developments to earn income, as a significant price jump above the strike price seems unlikely in the near future. Also, selling cash-secured puts at prices below current stock levels could allow us to either earn premiums or buy into these strong companies at a discount. The main risk to this outlook is what the Bank of England will do next. While they held rates steady on August 1st, any unexpectedly high inflation data in the next report could delay anticipated rate cuts. This could limit house price growth and challenge our current strategy. Create your live VT Markets account and start trading now.

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