After months of consecutive growth house prices have experienced a ‘modest’ downturn according to the latest data from Nationwide.
The mortgage lender revealed prices had increased by 12.1% over the year to April, which is less buoyant than the 14.3% experienced in March.
Prices were still up by 0.3% compared to the previous month and the housing market still looks relatively strong. Indeed, a Nationwide poll revealed 38% of people were actively moving or considering a move.
This is despite the cost-of-living crisis deepening and interest rates looking set to continue rising.
Robert Gardner, Nationwide’s chief economist, said this was the smallest monthly gain since September 2021. However, it was also the eleventh time in the past 12 months the annual growth rate had been in double digits.
“Housing market activity has remained solid with mortgage approvals continuing to run above pre-Covid levels,” he said.
“With the stock of homes on the market still low, this has translated into continued upward pressure on house prices.
“Nevertheless, it is surprising that conditions have remained so buoyant, given mounting pressure on household budgets which has severely dented consumer confidence.”
What is the impact of the cost-of-living rise on the housing market?
Gardner said people’s expectations of their own personal finances over the next twelve months had dropped to levels last seen during the depths of the global financial crisis more than a decade ago.
What’s more, he explained, housing affordability had deteriorated because house price growth had been outstripping income growth and borrowing costs had increased.
Yet the survey by Nationwide of around 3,000 consumers across the UK found 38% of respondents were either in the process of moving or considering a move. A high proportion were in London.
Nationwide also revealed 17% of those moving or considering a move were doing so, in part, to reduce spending on housing, either by moving to a different area or by moving to a smaller property.
How will rising interest rates impact the property market?
Predictions of another interest rate rise don’t seem to be impacting buyers’ enthusiasm. Karen Noye, mortgage expert from Quilter, thinks the zeal for moving amongst so many may be an attempt to secure mortgage deals before rates soar further.
She said: “With another interest rate increase on the cards potentially next week people may still be scrambling to move to take advantage of low interest rates and as a hike is all but telegraphed at this point.”
What’s the longer-term outlook for the property market?
Noye said whilst the market remains strong, the rising cost of living would eventually start to have an impact.
“When push comes to shove people who are feeling the financial strain of the current macro-economic backdrop may choose not to move during this trying time,” she said.
“This may have the effect of knocking down house prices gradually as the market cools off from one of the busiest periods in over a decade before the financial crash.”
Lucy Pendleton, property expert at independent estate agents James Pendleton, thought there was another year of the property boom ahead. She said: “Stretching believability and affordability, this elastic band market is finally showing some signs of strain.”
She added: “Yet with such a long bull run, it might take until next year for any hint of prices falling.
“Supply is still low, with fewer houses being built, while the intent to buy is still strong, especially among private tenants who are wondering if the pain of a mortgage is preferable to rising rents.”
