In June, the average UK home price surpassed its previous record high, although an indicator found that there are “tentative signs of a downturn.”
According to Nationwide Building Society, price growth slowed from 11.2 percent in May to 10.7 percent in June.
The average home price in the UK increased by 0.3% month over month to £271,613 in June.
‘The price of a typical UK property increased to a new record high of £271,613, with average prices jumping by over £26,000 in the past year,’ said Robert Gardner, Nationwide’s chief economist.
There are preliminary hints of a slowdown, with surveyors reporting a decrease in new buyer inquiries and the number of mortgages approved for home purchases reverting to pre-pandemic levels in April.
Despite the increased pressure on household budgets from high inflation, which has already lowered consumer confidence to a historic low, the housing market has maintained a surprizing level of momentum.
“Part of the resiliency is likely to reflect the current strength of the labor market, where the number of open positions has surpassed the number of unemployed persons in recent months,” says the report.
Meanwhile, according to Mr. Gardner, there are not a lot of properties for sale, which keeps pressure on housing prices to rise.
The market is anticipated to slow down even more as the strain on household finances grows in the upcoming quarters, with inflation predicted to reach double digits by year’s end.
Furthermore, it is anticipated that the Bank of England would increase interest rates further, which might have a cooling effect on the market if mortgage rates follow suit.
Looking at statistics for the entire UK, Mr. Gardner claimed that in the three months leading up to June, the growth of house prices slowed in several locations.
With home prices increasing 14.7% year over year, a modest increase over the first quarter, the South West (of England) surpassed Wales as the region with the best performance.
East Anglia, where yearly price rise continued at 14.2%, was closely behind this.
Wales experienced a slowdown in annual price rise, which fell to 13.4% from 15.3% in the first quarter.
“Price growth in Northern Ireland was 11.0 percent, the same as it was in the previous quarter. House prices increased by 9.5% in Scotland over the previous year.
The annual growth rate of home prices in England decreased from 11.6% in the previous quarter to 10.7%.
Although the South West had the best performance, overall southern England’s growth was less robust than that of northern England.
North West was the best-performing region in northern England, with price increase increasing to 13.3% year over year from 12.4% in the first quarter.
London continued to be the UK region with the worst performance, with annual price rise falling to 6.0% from 7.4% in the previous quarter.
Myron Jobson, senior personal finance analyst at Interactive Investor, stated: “Mortgage rates have soared to levels we haven’t seen in a while while property prices have increased faster than salaries, creating an affordability constraint.”
“These factors are likely to go some way toward moderating exuberant home prices, along with the potential of increased interest rates to rein in runaway inflation.”
“Increased borrowing costs have come at a time when discretionary incomes are already declining and the UK is inching closer to recession,” said Nicky Stevenson, managing director of agent group Fine & Country.
With inflation still set to reach its high and the Bank of England now signaling more aggressive monetary tightening, these pressures are certain to strain affordability in the months to come.
“The question is whether we will see prices slow to a crawl, plateau, or start to plummet if we have a recession,” said Sarah Coles, senior personal finance analyst, Hargreaves Lansdown.
“An awful lot depends on variables we don’t yet know,” the author writes. “These include how high interest rates will go, how severe any potential recession may be, the effect it might have on jobs, and if this is bad enough to actually harm the real estate market.”
The frantic race for real estate during a period of skyrocketing prices may be finished, she continued.
Buyers have time to think about whether this is a decision they can actually afford and whether they will still be delighted with it if prices decline later in the year.