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House price growth ‘slows’ to 12% in April

Paloma Kubiak
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Paloma Kubiak

Annual UK house price growth slowed to around 12% in April, down from over 14% in the previous month.

According to Nationwide’s monthly house price index, this is the 11th time in 12 months that the annual growth rate has been in double digits.

House prices are up 0.3% month-on-month, taking into account seasonal effects, making it the ninth consecutive month of increases.

However, it said this was the smallest month-on-month change since September last year.

The report said the average house price was £267,620 in April, up £2,308 in the space of a month.

Robert Gardner, Nationwide’s chief economist, said that the current market buoyancy is “surprising” given the mounting pressure on household budgets, comparing consumer personal finance budgeting estimates to “the depths of the global financial crisis” in 2008.

He added: “Affordability has deteriorated because house price growth has been outstripping income growth by a wide margin over the past two years, while more recently borrowing costs have increased, though they remain low by historic standards.”

Emma Cox, managing director of real estate at Shawbrook, said: “The acid test for the market will be the run up to summer. Traditionally a hive of activity, sellers will be hoping for current transaction levels and price growth to prevail. Expectations are that house prices will be shielded from current pressures for the remainder of 2022, with reality perhaps starting to bite in 2023 if current market conditions persist.”

Rising interest rates

Gardner expects the housing market to continue to slow as the cost-of-living crisis and economic uncertainty squeezes household budgets.

He added that inflation is expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high and the Bank of England (BoE) raises the base rate again.

This was backed by revised estimates in the latest Capital Economics (CE) review, as it predicts a 5% decline in house prices between 2022 and 2025.

The consultancy also warned that the Monetary Policy Committee (MPC) will raise the base rate from 0.75% to 1% on 5 May, with a hike to 3% expected in 2023, though other economists put the 2023 figure at 2%.

However, given the low interest rates at present, some believe that lenders will be able to pick up the slack to remain competitive.

Mark Harris, chief executive of SPF Private Clients, said: “Even though rates are edging upwards, and may again at the next MPC meeting, they are coming off an extremely low base.

“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.”

Gardner added: “Housing market activity has remained solid with mortgage approvals continuing to run above pre-Covid levels.

“Demand is being supported by robust labour market conditions, where employment growth has remained strong and the unemployment rate has fallen back to pre-pandemic lows. With the stock of homes on the market still low, this has translated into continued upward pressure on house prices.”

The ‘race for space’ is fuelling market buoyancy

A survey conducted by the lender of 3,000 customers found that over a third (38%), were in the process of, or seriously considering moving.

Nationwide said this was “very high” considering that housing stock turnover was typically 5%.

It added that was higher than the figures for April 2021, which was at the height of the pandemic and when stamp duty incentives were brought in.

The mutual found that nearly half of Londoners wanted to leave the city. The lowest percentage of potential movers was in Wales, but the survey still found a quarter of Welsh respondents wanted to up sticks.

Gardner said the proportion was highest among private renters at 45%, but was also heightened for those with a family at 44% and outright homeowners at 30%.

Around 42% of those owning with a mortgage also wanted to move.

It added that 17% of those moving or considering a move said they were downsizing or moving to reduce household spending.

Cox argued that poor supply levels will continue to insulate sellers, especially in traditional hotspots.

She said: “The return to city centres after a two-year hiatus and the demand for more face to-face interactions again could reignite the UK’s love affair with cities. The staycation and second home boom in seaside towns also remains steadfast, making quaint British towns a top priority for buyers too.”