Nationwide House Price Index: slowing in UK house price growth
30th June 2022 07:34
by Myron Jobson from interactive investor
The current pace of price appreciation doesn’t appear sustainable over the long run, but a sharp fall in prices is unlikely.
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “UK home prices ran hot again in June, notching another month of double-digit year-over-year gains. The price of a typical UK home has risen by a staggering £26,000 in the past year to hit a new record high of £271,613.
“Property prices have gone up faster than wages, creating an affordability squeeze, while mortgage rates have risen to levels we haven’t seen in a while. These factors, as well as the prospect of higher interest rates to rein in runaway inflation, are likely to go some way towards taming frothy housing prices.
“The housing market has already begun to show signs of cooling. Mortgage activity has started to come down, falling back towards pre-pandemic levels in April, and new buyer enquiries has waned – which is indicative of the inflationary pressures currently exerted on household budgets.
“While the current pace of price appreciation doesn’t appear sustainable over the long run, that doesn’t mean that a sharp fall in prices is imminent. A slowdown rather than a property market crash appears more likely because there is too much of an imbalance between supply and demand for homes. And builders, who are still ramping up productivity after virtually grinding to a halt at the height of the pandemic, can’t build quickly enough to meet demand.
“The housing market remains a tough for first-time buyers to crack. Mortgage affordability is a growing hurdle thanks to the escalating cost of living squeeze on budgets – many of which have already been cut to the bare bone to help fund a property purchase.
“But the scrapping of a punitive mortgage stress test from August, which will allow buyers to take out larger mortgages, could prove to be a savings grace for wannabe homeowners. But it could also fuel the imbalance between supply and drive-up property prices. In any case, borrowing more could add further pressure on budgets amid the current period of uncertainty for personal finances.”
Key points
- Nationwide’s latest house price index reveals modest slowing in annual UK house price growth to 10.7% in June, from 11.2% in May
- Most regions saw slight slowing in annual growth in Q2
- South West overtook Wales as strongest performing region, while London remained weakest
- South West also strongest-performing region through the pandemic
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