Is the market heading in the right direction?
UK house prices rose by 0.2% month on month to £266,604 in June, according to recent data from Nationwide Building Society.
This increased the annual growth rate from 1.3% in May to 1.5% in June, placing prices about 3% below the all-time high recorded in the summer of 2022.
Despite the increase in house prices, housing market activity has remained relatively flat over the past year, with the total number of transactions down approximately 15% compared to 2019 levels, with mortgage-involved transactions dropping nearly 25% due to higher borrowing costs. Cash transactions are up about 5% from pre-pandemic levels.
The latest Nationwide House Price Index showed that while earnings growth has outpaced house price growth in recent years, this has not offset the impact of higher mortgage rates, which remain well above the record lows of 2021.
“For example, the interest rate on a five-year fixed rate mortgage for a borrower with a 25% deposit was 1.3% in late 2021, but, in recent months, this has been nearer to 4.7%,” said Robert Gardner, chief economist at Nationwide Building Society.
“As a result, housing affordability is still stretched. Today, a borrower earning the average UK income buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 37% of take-home pay – well above the long run average of 30%.”
Maeve Ward, head of intermediary sales at property lender Together, noted that while house prices are showing some resilience, the market is in a very interesting position right now.
“With the Bank of England holding interest rates again, many first-time buyers, home movers and investors who have been waiting may delay their plans further,” Ward said. “However, others may see this as an opportunity; snapping up property deals as some banks are cutting their rates.”
“The latest house price figures provide concrete evidence that the market is very much heading in the right direction,” added Marc von Grundherr (pictured), director of lettings and sales agency Benham and Reeves. “Although it remains a case of not running before we can walk, we look set for a far more prosperous year both with respect to house price growth and overall market activity levels.
“While this week’s general election is unlikely to slow this momentum, there’s a good chance it could add to it, depending on who comes out on top and what housing market initiatives they introduce.”
Meanwhile, the regional house price indices for the second quarter of 2024 show a mixed picture.
Northern Ireland was the best performing area with prices up 4.1% compared to Q2 2023. In England, overall prices increased by 0.6%, while Wales and Scotland both saw a 1.4% year-on-year rise. Northern England, including North, North West, Yorkshire and the Humber, East Midlands, and West Midlands, outperformed southern England with a 2.4% year-on-year increase.
In contrast, southern England, comprising South West, Outer South East, Outer Metropolitan, London, and East Anglia, saw a 0.3% year-on-year fall, the same as the previous quarter. London was the best performing southern region with annual price growth at 1.6%, while East Anglia was the weakest, with prices down 1.8% year-on-year.
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