The UK property market has been booming in recent months, but may have finally displayed its first signs of a slowdown.
Nationwide’s latest House Price Index revealed that property prices continued to increase in May, with 0.9 per cent growth. This represented the tenth successive month of increase and means the average UK home price is now £269,914.
However, the annual rate of increase was slightly down on April, from 12.1 per cent to 11.2 per cent.
These figures raise the question of how strong the housing market is likely to be in the months ahead as the effects of inflation, lower economic growth and higher interest rates take their toll.
Reflecting on the data, Nationwide economist Robert Gardiner said: “Despite growing headwinds from the squeeze on household budgets due to high inflation and a steady increase in borrowing costs, the housing market has retained a surprising amount of momentum.”
Among the factors he cited as supporting prices are the lack of stock and the near-50 year low level of unemployment.
However, he acknowledged that the situation looks somewhat less promising for the rest of 2022 and beyond, noting that inflation may push into double digits, consumer confidence is at “record lows” and further base rate rises, if passed on by mortgage lenders, will “exert a cooling impact on the market”.
The Bank of England’s Monetary Policy Committee raised the base rate from 0.75 per cent to one per cent in its May meeting. The body will consider the question of a further rate rise on June 16th.
Evidence that the market may already be cooling emerged at the end of May with new government data showing a fall in mortgage approvals from 69,531 in March to 65,974 in April. This represented the lowest number of mortgages in any month since June 2020.
Alongside this, the level of net borrowing by individuals was also down from £6.4 billion in March to £4.1 billion in April.
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