House price growth slowed again in May after a small bump in prices in April.
Nationwide’s latest house price index showed there was a 0.1 per cent month-on-month fall in house prices in May, while the annual rate of house price growth fell to -3.4 per cent, from -2.7 per cent in April.
Headlines | May-23 | Apr-23 |
Monthly Index* | 517.5 | 518.2 |
Monthly Change* | -0.1% | 0.4% |
Annual Change | -3.4% | -2.7% |
Average Price (not seasonally adjusted) | £260,736 | £260,441 |
* Seasonally adjusted figure
Nationwide chief economist Robert Gardner said the “softened” prices was largely a result of base effects with prices “broadly flat over the month after taking account of seasonal effects”.
Gardner noted that average prices remain 4 per cent below their August 2022 peak.
“Recent Bank of England data had shown some signs of recovery in housing market activity, although the number of mortgages approved for house purchase in March was still around 20 per cent below pre-pandemic levels,” Gardner said.
Data released from HM Revenue and Customs yesterday showed property sales for April were similarly subdued, with residential property sales reaching their lowest level since October 2021.
Gardner believes headwinds in the housing market were set to strengthen over the coming months.
“While consumer price inflation did slow in April, it was a much smaller decline than most analysts had expected.
“As a result, investors’ expectations for the future path of bank rate increased noticeably in late May, suggesting it could peak at around 5.5 per cent, well above the circa 4.5 per cent peak that was priced in around late March,” Gardner said.
He added: “Furthermore, rates are also projected to remain higher for longer.”
If this is maintained, Gardner said it will likely excerpt renewed upward pressure on mortgage rates.
“Nevertheless, in our view a relatively soft landing remains the most likely outcome since labour market conditions remain solid and household balance sheets appear in relatively good shape,” he said.
Although activity is likely to remain subdued in the near term according to Gardner, healthy nominal income growth coupled with modestly lower house prices “should help to improve housing affordability over time, especially if mortgage rates moderate once bank rate peaks.”
jane.matthews@ft.com
