In May, after a shaky start to the year, the UK housing market showed a hint of recovery. The latest data from Nationwide Building Society indicates a modest rise in house prices, hinting at underlying resilience despite economic challenges.
In May, the average UK house price increased by 0.4%, reaching £264,249, according to Nationwide. This rise comes after a decline of the same margin in April, signaling a potential stabilisation in the market. This shift not only reverses the previous two months of price falls but also pushes the annual growth rate to 1.3%, more than double the rate observed in April.
Economic Factors Influencing the Housing Market
Nationwide’s chief economist, Robert Gardner, highlighted the resilience of the market amidst significant affordability pressures and recent increases in long-term interest rates. He noted, “Consumer confidence has improved noticeably over the last few months, supported by solid wage gains and lower inflation.” This improvement is crucial as it comes after slight increases in mortgage rates earlier in the year, which had slowed down market activity.
The easing inflation, which fell to 2.3% in the year leading up to April 2024, down from 3.2% the previous month, alongside robust wage growth and low unemployment levels, have also bolstered consumer confidence. These factors have made it easier for buyers to cope with higher house prices and mortgage rates.
The Role of Consumer Confidence and Housing Supply
Sarah Coles, head of personal finance at Hargreaves Lansdown, explained that while higher prices and mortgage rates pose challenges, the improved personal financial outlook for many has allowed them to push through these barriers. Moreover, a report from property website Zoopla noted that the supply of homes for sale in Britain has reached its highest level in eight years, which might help to curb further price increases for the remainder of 2024.
Political Climate and the Housing Market
With a General Election on the horizon, there’s a cloud of uncertainty over how it might impact the housing market. However, Nationwide’s research suggests that the election is unlikely to significantly affect house prices. Historical trends show that previous elections have not disrupted the underlying market dynamics, as buyers continued to make purchases regardless of the political environment.
Anna Clare Harper, chief executive of GreenResi, echoed this sentiment by highlighting the resilience of the market to political shifts. “Elections make investors and aspiring homeowners nervous, but the results are unlikely to make a material difference to house prices,” she remarked.
The potential for interest rate reductions by the Bank of England could introduce more competitive mortgage deals in the near future. Nathan Emerson, chief executive of Propertymark, anticipates this could lead to a welcome influx of competitive lending options from banks, further stimulating the market.