After a dip in the previous two months, UK house prices rose by 0.4% in May 2024, according to figures from mortgage lender Nationwide. This indicates a potential return to stability in the face of rising borrowing costs.
The news surprises some, as market analysts predicted a more modest increase of 0.1%. Compared to May 2023, house prices are still up by 1.3%, exceeding initial expectations of a 0.8% gain. The average property value now sits at £264,249, slightly increasing from April’s figure of £261,962.
“The market appears to be showing signs of resilience in the face of ongoing affordability pressures,” commented Robert Gardner, chief economist at Nationwide. This resilience can be attributed to several factors.
Firstly, consumer confidence is improving. Despite high mortgage rates, rising wages and signs of inflation cooling down provide potential buyers some financial security. Additionally, the job market remains strong, which contributes to a sense of stability.
Secondly, there needs to be more houses available on the market. This ongoing issue helps to prop up prices, preventing a significant decline even with rising interest rates. Sellers are more likely to budge on price if they know they will only easily find buyers for their properties.
However, it’s important to note that the May increase is modest. Compared to May 2022, the average house price is still lower by nearly £6,000. This suggests a potential slowdown in the previously hot housing market.
Looking regionally, price growth varies. While Nationwide provides national figures, other sources, like the Office for National Statistics (ONS), offer more granular data. Their most recent report, covering February to March 2024, shows property values rose by 0.7% across the UK. However, significant differences exist between regions.
England and Wales saw moderate increases of 1% and 1.3%, respectively, while Scotland experienced a more substantial rise of 6.7%. Northern Ireland also witnessed steady growth of 4% in the year to the first quarter of 2024.
The future of the UK housing market remains to be determined. The Bank of England’s upcoming interest rate decision in June will be closely watched. A further increase in borrowing costs could dampen buyer demand and lead to a price correction.
On the other hand, a continued tight supply of houses and a strong labor market could prevent a significant price drop. Ultimately, the market’s trajectory will depend on a complex interplay of economic factors and consumer confidence.
For potential homebuyers, the news of a slight price increase might be discouraging, especially considering the ongoing cost-of-living crisis. However, the limited supply and signs of market resilience suggest that significant price drops are unlikely shortly.
Those looking to enter the property market may need to adjust their expectations and budget accordingly. Considering their financial situation and long-term goals will be crucial when deciding on this evolving market.