May 2023 saw a 0.1% month-on-month fall in house prices, according to the latest data from Nationwide.

The annual rate of house price growth has now slipped back to -3.4% on the Nationwide House Price Index, from -2.7% in April.

The 0.1% fall for May follows a rise in house prices of 0.4% in April. The average price of a home in the UK is now £260,736 (not seasonally adjusted).

Commenting on the figures, Robert Gardner, Nationwide’s chief economist, said the softening of house price growth in May largely reflected “base effects”, with prices broadly flat over the month after taking account of seasonal effects.

He also pointed out that average prices remain 4% below their August 2022 peak.

Gardner said: “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% below pre-pandemic levels.

“Moreover, headwinds to the house market look set to strengthen in the near term.”

Gardner added: “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.

“While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time, especially if mortgage rates moderate once Bank Rate peaks.”

Industry reaction

Nathan Emerson, CEO of Propertymark, said: “The total number of properties for sale are edging back to pre-pandemic levels, which is positively supported by an increase in market appraisals being undertaken.

“This is causing an interesting change in the property sales market as a fall in demand from buyers has allowed the number of homes available for sale to recover since the spike of activity seen during the pandemic. However, there remains a steady level of transactions happening, which is good news for the market and the wider economy.”

Chris Druce, senior research analyst at Knight Frank, said: “With fewer transactions at the start of the year due to the uncertainty caused by the mini-Budget, UK house price data has oscillated in recent months. However, today’s figures from Nationwide suggest that we’ve entered into a more stable period.

“There is still an element of price exploration playing out in the residential property market, as buyers and sellers adapt to the reduction in spending power that has occurred due to the significant increase in borrowing costs over the last 18 months.

“While an improved economic outlook and solid jobs market has supported buyer sentiment in recent months, and created an active spring sales market, further expected increases in borrowing costs after last week’s inflation figures will act as a brake.

“We expect this pressure, combined with an increase in supply relative to the pandemic period, will see UK property prices fall by a few percent this year.”

Marc von Grundherr, director of Benham and Reeves, said: “We’ve seen a promising start to the year so far in terms of buyer interest returning to the market but what we’re simply not seeing is this interest convert at the same rate.

“This buyer hesitation has been largely spurred by increasing interest rates and while the market is standing firm, it’s this more tentative approach to buying that is causing house prices to stutter.”

James Forrester, managing director of Barrows and Forrester, said: “The market has continued to tread water where the current rate of house price growth is concerned and with a further hike to interest rates likely this month, we can expect this subdued performance to remain over the coming months. 

“Those sitting on the fence in anticipation of a return to the pandemic glory days of double digit price growth will be sitting for some time. However, the outlook is broadly positive and while a natural correction was always likely, we are yet to see any inkling of a market crash.”

Chris Hodgkinson, managing director of House Buyer Bureau, said: “Market performance so far this year has been inconsistent, to say the least, and this uncertainty is proving problematic for the nation’s homebuyers and sellers who continue to tussle when negotiating on price. 

“The consequence of this back and forth is a more protracted transaction timeline and a greater threat of sales falling through. That said, buyer activity is building and while the current landscape is certainly more difficult, those who are able to negotiate it are still securing a good price for their home.”