UK house prices down 3.4% in May

Housing market activity in the UK is likely to remain “subdued in the near term”, according to the latest monthly report from Nationwide.

The building society found that average house prices in the year to May fell by 3.4%, the biggest decrease since July 2009.

Prices also edged down by 0.1% from the previous month, taking the average property price to £260,736.

Average house prices remain 4% below their August 2022 peak.

Nationwide warned that further rises in mortgage interest rates could hit the housing market this year.

“While consumer price inflation did slow in April, it was a much smaller decline than most analysts had expected,” said Robert Gardner, Nationwide’s chief economist. “As a result, investors’ expectations for the future path of Bank Rate increased noticeably in late May, suggesting it could peak at c5.5%, well above the c4.5% peak that was priced in around late March.”

Interest rates are also now projected to remain higher for longer.

“If maintained, this is likely to exert renewed upward pressure on mortgage rates,” Gardner said.

Housing market is cooling off, surveyors say

House prices in the UK are still rising, but the pace of growth is slowing amid a drop in interest from potential buyers.

In the latest monthly survey by the Royal Institution of Chartered Surveyors (RICS), 27% of professionals reported a fall in interest from would-be house buyers in June — the third consecutive month that new buyer enquiries have declined.

A shortage of properties coming on to the market is continuing to hamper activity, and this lack of stock that means that house prices have continued to climb despite the cooling in demand.

Two-thirds (65%) of surveyors said they had seen an increase in house prices. This is down from than the recent April high of 78% but still well above the long-term average of 13%.

Looking further ahead, 37% said they expected house prices to continue rising in the next 12 months.

In the lettings market, rents are forecast to rise due to the continued imbalance between supply and demand.

An increase in tenant demand was reported by 36% of surveyors in June, while 11% saw a fall in the number of new landlord instructions. Just over half (52%) of respondents predicted that rents will rise over the coming three months.

Typical UK home now costs over £250,000

House prices in the UK have risen by 9.9% in the last year and the average cost of a home now exceeds a quarter of a million pounds.

It’s the first time this milestone has been passed in Nationwide’s monthly report on the market.

The average house price was £250,311 in October, compared with £248,742 in September, the building society said.

Since the start of the pandemic in March 2020, the price of a typical UK home has increased by £30,728.

“Demand for homes has remained strong, despite the expiry of the stamp duty holiday at the end of September,” said Robert Gardner, Nationwide’s chief economist. “Indeed, mortgage applications remained robust at 72,645 in September, more than 10% above the monthly average recorded in 2019. Combined with a lack of homes on the market, this helps to explain why price growth has remained robust.”

Gardner added, however, that the outlook remains “extremely uncertain”.

“If the labour market remains resilient, conditions may stay fairly buoyant in the coming months — especially as the market continues to have momentum and there is scope for ongoing shifts in housing preferences as a result of the pandemic to continue to support activity,” he explained.

“However, a number of factors suggest the pace of activity may slow. It is still unclear how the wider economy will respond to the withdrawal of government support measures. Consumer confidence has weakened in recent months, partly as a result of a sharp increase in the cost of living.”

Rising interest rates may also cool down the market, Gardner added.

A decision on interest rates will be announced by the Bank of England’s Monetary Policy Committee (MPC) on Thursday.

Buyer demand outstrips number of UK homes for sale during November

House prices in the UK are predicted to continue to rise in 2014, according to the Royal Institution of Chartered Surveyors (RICS), which released its UK Residential Market Survey on Monday.

The independent, representative professional body said that the amount of homes coming onto the UK market in November this year did not meet increasing buyer demand. A further 59% of chartered surveyors predicted that prices will continue an upward trend, rather than drop back over the coming three months. This is said to be the highest reading since September 1999, which indicates that the higher demand and lower supply is having an impact on the housing market.

According to the RICS, house prices picked up sharply in November 2013, with a net balance of 58% more respondents reporting price growth, up from 57% in October. Each region in the UK reportedly saw property prices rise for the second successive month. Some areas of the UK that are struggling, however the results of the RICS survey show that regional markets are now responding to government incentives and positive economic news.

Despite the lack of housing stock for sale, the number of property transactions is increasing and during the three months to November, the average number of homes sold per chartered surveyor amounted to 20.6, compared to the same period in 2012 when the survey respondents were selling just 15.9. The RICS added that a net balance of 76% of surveyors expect sales levels to increase in 2014.

Simon Rubinsohn, RICS Chief Economist, stated: “It’s no secret that the housing market is on the way up and prices are surging ahead in many parts of the country. The Bank of England’s recent decision to withdraw the Funding for Lending scheme – which allows banks to borrow more cheaply and pass the benefits on to mortgage applicants – could well have some impact on the number of people able to purchase a home. Although the improvement in wholesale and retail funding markets may mean the impact on mortgages is relatively limited.

“One thing we are very concerned about, however, is the lack of both new and existing homes coming on to the market. As the Chancellor pointed out last week, housebuilding is on the up, but it is rising nowhere near quickly enough to make up the shortfall that has built up in recent years. If there is not meaningful increase in new homes, the likelihood is that prices, and for that matter rents, will continue to push upwards making the cost of shelter ever more unaffordable.”

The RICS regulates property professionals and surveyors in the UK and other sovereign nations. Its members are Chartered Surveyors and are entitled to use MRICS after their names. The organisation also provides education and training standards, protects consumers with strict codes of practice and advises governments and business, as well as providing expertise in matters involving fixed assets, including but not limited to land and real property.