Tentative signs of a slowdown – Nationwide HPI

The July Nationwide House Price Index shows that annual house price growth increased slightly to 11% from 10.7% in June. Prices were up just 0.1% month-on-month after taking account of seasonal effects but this is still the twelfth successive monthly increase.

Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist said:

“The housing market has retained a surprising degree of momentum given the mounting pressures on household budgets from high inflation, which has already driven consumer confidence to all-time lows. While there are tentative signs of a slowdown in activity, with a dip in the number of mortgage approvals for house purchases in June, this has yet to feed through to price growth.

“Demand continues to be supported by strong labour market conditions, where the unemployment rate remains near 50-year lows and with the number of job vacancies close to record highs. At the same time, the limited stock of homes on the market has helped keep upward pressure on house prices.

“We continue to expect the market to slow as pressure on household budgets intensifies in the coming quarters, with inflation set to reach double digits towards the end of the year. Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.

 

Industry reaction to the Nationwide’s data:

 

Tom Bill, head of UK residential research at Knight Frank:

“Despite double-digit house price growth, a slowdown is in the post.

“Mortgages have become notably more expensive in recent months and inflation will get worse before it gets better.

“For those wondering how house prices can continue to grow as the cost-of-living squeeze intensifies, the answer is that they are happening for the same reason – a supply chain disruption.

“As more property is listed and demand is eventually curbed by higher rates, we expect price growth to drop to single digits this year.”

 

Simon Gerrard, Managing Director of Martyn Gerrard Estate Agents and Abbeytown Ltd:

“These figures reflect a very scary time for buyers with so few properties coming to the market and mortgage rates seemingly going up by the day.

“However, if Liz Truss’ economic plan leads to interest rates rising to the region of seven percent, as has been widely predicted, the housing market would likely face an almost apocalyptic, once-in-a-generation crash.

“Today, it is those looking to sell mid-range three-ish bedroom properties who are benefitting the most from the chronic under-supply of homes, with countless examples of multiple offers well above asking price. But this cannot continue and it is incredible that the housing supply crisis isn’t further up the agendas of both Prime Ministerial candidates.

“While it may not be an immediate vote winner, the reform of our antiquated planning regulation would get Britain building the new homes we so desperately need.”

Iain McKenzie, CEO of The Guild of Property Professionals:

“While house prices continue to defy gravity, the monthly growth figures are starting to level out.

“Demand for properties has dramatically outweighed supply since 2020 and that has pushed prices to record levels.

“Over the past month the number of buyer enquiries has started to subside, and we are seeing a more balanced sales market that could mean we will see house price growth cool.

“While homeowners have seen the value of their property grow substantially, increasing financial pressure from cost-of-living inflation has many hesitant about upscaling and some potential movers are now deciding to stay put.

“When people become hesitant about moving, or their budgets are squeezed too tight and are unable to afford the right home, we could see transactions begin to fall.

“It is unlikely we will see a drop in prices anytime soon. Around half of buyers move because their living situation changes and they are compelled to move to a new property – and so long as this demand remains buoyant, so too will house prices.”

 

Jason Tebb, CEO of OnTheMarket:

“Annual house price growth increased slightly to 11 per cent in July, suggesting, remarkably, that sentiment remains largely unchanged, despite considerable headwinds.

“The subtle rebalancing of the housing market continues as the number of new properties for sale slowly increases. This is partly down to seasonal effects when you’d expect increased levels of stock to become available.

“The ‘new normal’, an elevated version of the pre-pandemic market, continues with housing transactions in the three months to May around 20 per cent below the levels seen during the stamp duty holiday but 5 per cent above pre-Covid levels.

“Serious property seekers remain determined to move and take advantage of mortgage rates before they rise further.”

 

Marc von Grundherr, Director of Benham and Reeves:

“You’d have thought that having gorged themselves on a feast of mortgage affordability and stamp duty reductions during the pandemic, the appetite of the nation’s homebuyers would be dwindling.

“This clearly isn’t the case and even a string of consecutive interest rate hikes are yet to taint their taste buds as they continue to pile their plates high – pushing house prices to record highs in the process.

“With the bricks and mortar buffet on offer remaining understocked with regard to the level of homes available, we can expect property prices to remain robust even against an uncertain economic backdrop.”

 

Nicky Stevenson, Managing Director of Fine & Country:

“Annual house price growth accelerated unexpectedly in July even as storm clouds gathered across the broader economy.

“Increased borrowing costs and shrinking consumer purchasing power have yet to take the heat out of the market, and demand continues to be fuelled by existing homebuyers looking to trade-up.

“Buyers and sellers alike will now be watching closely this week to see if the Bank of England makes good on its threat to hike its base rate to 1.75% — the biggest increase for more than a quarter of a century.

“Cheap debt is fast disappearing and against this backdrop, many expect a period of more subdued house price growth later in the year.”

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