NATIONWIDE says annual house price growth has edged higher in June to 2.2% as experts warn “we are still a long way from where mortgage pricing was before the war” in the Middle East.
UK annual house price growth picked up to 2.2% in June, from 1.7% in May, Nationwide’s House Price Index said.
The data for Q2 (the three months to June) indicates that all 13 regions in the UK saw positive annual house price growth, with all but one recording growth in the 0% to 4% range.
Northern Ireland was again the exception, with price growth continuing to outpace the rest of the UK by a wide margin.
At 8.6%, the rate of annual price growth was around four times faster than the 2.2% recorded in the UK as a whole (in Q2), where the strong performance echoes the trend seen in the border regions of Ireland.
Scotland and Wales both saw a slight pickup in annual house price growth in Q2 to 3.5%, while England also saw an acceleration, albeit to a modest 1.5%, from 0.9% in Q1.
Average prices in Northern England were up 3.1% year on year, with the North West remaining the top performing region in England – with prices up 3.9% year on year.
Average house price growth in Southern England was broadly stable at 0.7%. London remained the strongest southern region, albeit with a modest annual price rise of 1.6%.
The surrounding Outer Metropolitan and Outer South East regions recorded even more modest rises of 0.3% and 0.1% respectively.
Experts said the Bank of England is now not expected to raise its base rate as the war in the Middle East subsides somewhat – but mortgage rates are still high compared to before the conflict.
They also wait with bated breath as to what Andy Burnham’s impending leadership as UK Prime Minister will mean for the housing market.
We are still a long way from where mortgage pricing was before the war
Robert Gardner, Nationwide’s Chief Economist, said: “It is not surprising that the market has softened a little in recent months, given the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices and market interest rates. Indeed, consumer confidence and measures of housing sentiment have weakened, and mortgage approvals fell noticeably in May.
“While geopolitical tensions remain high, the signing of a memorandum of understanding between Iran and the US helped push oil prices back towards the levels prevailing before the conflict began.
“If the energy shock continues to subside, the Bank of England may not need to raise interest rates, or at least by less than had previously been anticipated – a view reinforced by the fact that UK inflation has also been lower than expected in recent months.
“In recent weeks a shift in market expectations for the future path of Bank Rate has helped to bring down the market interest rates which underpin fixed-rate mortgage pricing.
“If maintained, these trends will help to restore household confidence and ease affordability constraints, paving the way for a recovery in housing market activity in the coming quarters, providing that domestic political uncertainty does not adversely impact sentiment.”
Rupert Collingwood, Founder at The London Broker, said the South East market is stalling.
He added: “While it’s positive to see some growth, the devil is in the detail, as house price values will vary from street to street, house to house. The growth is likely concentrated in particular market segments, most likely the more affordable end of the property ladder, where activity and transactions are also concentrated, with mid and upper segments likely losing ground.
“The anaemic growth in the South East is likely a real time fall taking into account inflation, which would align with what we are seeing on the ground. My message to Andy Burnham: nothing helps cool the market faster than politicians floating kites aimed at tax changes on the biggest asset most people buy and sell.”
Riz Malik, Independent Financial Adviser at Southend-on-Sea-based R3 Wealth, called for stamp duty reform.
He added: “Even with oil prices falling, we are still a long way from where mortgage pricing was before the war. Even with the outlook for base rate hikes subsiding, that will not be enough to get the market moving.
“Stamp duty reform will be the only thing to get Britain moving and with Burnham closer to No 10, that could be a real possibility.”
The next six months could prove to be a good time to buy
Graham Nicoll, Financial Planner, Chartered FCSI at NCL Wealth Partners, said he doesn’t expect the housing market to improve anytime soon.
He added: “The modest rebound suggests the housing market is stabilising temporarily, rather than entering another boom and can change again very quickly. Demand is still constrained by affordability, elevated borrowing costs and fragile consumer confidence.
“Global geopolitical tensions, energy price volatility and ongoing UK political uncertainty are all encouraging buyers to pause major financial decisions. I am seeing clients struggling to sell their properties, especially in the £1m+ price range. At the same time, more landlords exiting the market is increasing supply in some areas, limiting price growth.
“Unless mortgage rates fall materially and confidence improves, expect a patchy regional recovery rather than a broad-based surge in house prices.”
Andrew Montlake, CEO at London-based Coreco, is positive about the next few months.
He added: “The big question is whether or not this can be sustained and we all know sentiment is everything in the housing market. An Andy Burnham bounce, a period of nice weather and even England having a good World Cup campaign can contribute to a feel good factor.
“However, we all know that there are some headwinds to be negotiated and the housing market can be a fickle beast at the best of times. I still remain convinced that the next six months could prove to be a good time to buy and canny buyers will continue to make the best of the buyers market.”
