Properties across the UK have seen their values rise by an average of almost £3,000 over the past year, with strong buyer demand driving up house prices most rapidly in the North.
New figures from Nationwide have revealed that house prices in the UK grew by 3.5% in the year to May, up from last month’s annual increase of 3.4%, as buyer demand remains strong across much of the country.
The increase is supported by numerous factors, according to Robert Gardner, Nationwide’s chief economist, including low levels of unemployment, good earnings growth, strong “household balance sheets” and the promise of lower borrowing costs.
Since the Bank of England’s latest interest rate cut to 4.25%, lenders have been slashing rates and wheeling out more products to entice borrowers, boosting affordability for thousands of buyers.
The northern parts of the country, where homes are more affordable, continue to post higher rises in their house prices as they remain more accessible than the likes of London and the South East, where house prices are generally above the national average, which is now £273,427 according to Nationwide.
House prices supported by transaction numbers
The latest ONS report shows that there was a “significant jump” in property transactions in March, which is likely due to the stamp duty changes that took effect from 1st April. Buyers who got their purchases over the line before the deadline would likely have saved money on their tax bill.
However, the latest increase in house prices in May shows that purchases and buyer appetite remained strong even after the stamp duty thresholds were put in place; a point supported by Robert Gardner:
“Mortgage approvals data suggests that market activity appears to be holding up well following the end of the stamp duty holiday. Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.”
“Reassuring” growth as buyers remain keen
Nathan Emerson, CEO at Propertymark, said: “It is reassuring to witness consistent house price growth and a strong appetite as people continue to approach the homebuying and selling process, especially when the UK economy continues to adapt to both domestic and international events.
“With the rate of inflation still very much in sharp focus, it will be interesting to see what direction of travel the Bank of England may take regarding base rates when they meet again next week.
“Ultimately it would be welcome news for consumers should there be any further base rates cuts, however the Monetary Policy Committee will likely be approaching any decision with extreme caution, especially considering many economists are predicting inflation to further rise.”
The governor of the Bank of England, Andrew Bailey, hinted that more interest rate cuts are likely over the coming months, but much will rest on wider economic influences, including inflation.
One factor that has eased pressure among borrowers is the change that was brought in by the Bank of England in March, which meant lenders are no longer required to stress test borrowers at the standard variable rate plus 1%. This has led to lenders also making changes – and any boost in borrowing power is likely to spark housing market activity, further supporting house prices.
Flats and commuter hotspots
As with any movement in UK house prices, delving deeper into the data shows that not all segments of the market are equal, with certain locations and property types performing more strongly than others.
According to David Johnson, managing director of property consultancy INHOUS, smaller flats and properties within commuter belts have generated increased interest.
“Buyer demand picked up immediately after the bank holidays and has remained strong throughout May,” he said. “This level of buyer motivation has resulted in the majority of sellers receiving multiple offers and achieving their asking price. One and two bedroom apartments remain particularly sought-after as well as larger family homes in and around commuter hotspots.”
This variation was also noted by Tom Brown, managing director of real estate at Ingenious, who said: “There’s clearly a significant and notable shortage of housing inventory across various price brackets and locations. Consequently, any decline in homeowner sales is likely counterbalanced by increased demand from renters and investors.
“This is a trend that is not going away. However, it’s crucial to recognise that the situation isn’t consistent nationwide or across different property pricing brackets. It’s helpful to delve into subsectors and regional dynamics when assessing opportunities, as a broad market view can be misleading.
“In the real estate sector, we’re seeing significant investment capital for assets for long-term rental. On account of their scale and buying power, these typically institutional investors face fewer disruptions than owner occupiers or small-scale buy-to-let investors.
