House price growth cools but remains in double digits

House price growth cools but remains in double digits
Photographer: Jason Alden/Bloomberg

Annual house price growth cooled this month but remained comfortably within double digits, slowing from 14.3 per cent in March to 12.1 per cent in April.

The average house price therefore edged up by £2,308, to £267,620 over the period.

Month-to-month, this price rise marked a 0.3 per cent increase - the smallest monthly gain made by the housing market since September last year, according to Nationwide’s latest house price index published today (April 29).

Experts have said the slowed growth is simply an easing off on the gas pedal, rather than a dab on the brakes.

Jonathan Hopper, chief executive of Garrington Property Finders, said today’s data “shows that economic gravity is starting to be felt”.

“Conventional market dynamics are starting to reassert themselves,” Hopper explained.

While buyer demand remains strong, with a Nationwide poll finding 38 per cent of 3,000 consumers the bank spoke to were actively moving or considering moving, Hopper reckons price inflation is “slowly easing off” as supply improves.

In March, the number of new homes listed for sale rose for the first time in 12 months, according to the RICS Residential Market Survey.

“In time, the soaring cost of living will play an increasingly decisive role as it erodes would-be buyers’ disposable incomes – and especially if it prompts the Bank of England to raise interest rates further,” Hopper added.

Catherine Mann, a former chief economist at the OECD who joined the Bank of England’s monetary policy (MPC) last year, said the cost of living was likely to continue rising sharply into 2023 and that action - such as another rate rise in May - would be needed by the central bank.

The Bank has increased its base rate three times in the past five months - raising it to 0.75 per cent in March - as inflation rises ever further above the 2 per cent target.

The latest inflation data shows the cost of living rose to a 30-year high of 7 per cent in the 12 months to March, up from 6.2 per cent in February.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said while there is much speculation around rising interest rates and whether they will impact property prices, the fact the UK is in a low interest rate environment and is likely to be “for a while at least” could challenge that.

“Even though rates are edging upwards, and may again at the next MPC meeting, they are coming off an extremely low base,” Harris explained. 

“Lenders have plenty of cash to lend and are keen to lend to the right borrowers, although the more house price growth outstrips incomes the tougher it will be on the affordability side to get the numbers to add up.”