House price growth falls amidst household pressures

Annual house price growth is finally showing signs of slowing down, following from 14.3% in March to 12.1% in April, Nationwide’s House Price Index shows.

Prices rose by a modest 0.3% month-on-month, the smallest rise since September last year.

Households are currently being squeezed financially by rising inflation and energy bills, and it’s starting to impact consumer confidence.

Indeed, consumer expectations about their personal finances in the next year has dropped to levels seen during the height of the global financial crisis over a decade ago.

Despite their worries, a survey of around 3,000 people from Nationwide found that 38% were in the process of moving or thinking of moving.

The proportion is particularly high in London, where almost half are moving or thinking of doing so.

Robert Gardner, Nationwide’s chief economist, said: “It is surprising that conditions have remained so buoyant, given mounting pressure on household budgets which has severely dented consumer confidence.”

He added: “Housing 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).”

Some people are looking to move to save cash, as around 17% of movers or potential movers said they wanted to reduce sending on housing, either by moving to a cheaper area or downsizing.

However some want to move for the opposite reason, as a quarter (24%) are thinking of moving to a larger property.

Industry specialists all expect house price growth to fall to something more normal in the months ahead.

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. Current 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.”

Tom Bill, head of UK residential research at Knight Frank, said: “The wave of strong house price growth that has been building for two years appears to be breaking. Supply is not back to its seasonal norm but it has built from a low base as the spring market got underway.

“On top of that, the cost-of-living squeeze is being increasingly felt, mortgage rates continue to creep up and the race for space is calming down. We expect growth to decline to single digits by the end of the year and the property market should bear a much closer resemblance to its pre-Covid state by autumn.”

And Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “It could be said that Nationwide’s figures, though comprehensive and long-established, are a little dated as they are based on mortgage approvals and sales agreed some time ago.

“Since then, increasingly stretched affordability is starting to have an impact. However, for the time being at least, the supply/demand imbalance is continuing to outweigh concerns about rising interest rates and the cost of living, exacerbated by the situation in Ukraine.

“Further reductions in house-price growth seem inevitable.”

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