Thursday, 07 July 2022

House price growth slowed up last month

THE Nationwide Building Society has reported that house prices are still increasing but growth slowed down slightly in May.

Robert Gardner, Nationwide’s chief cconomist, said: “May saw a slight slowing in the rate of annual house price growth to 11.2 per cent, from 12.1 per cent in April. Prices rose by 0.9 per cent month-on-month, after taking account of seasonal effects — the tenth successive monthly increase.

“Despite growing headwinds from the squeeze on household budgets, due to high inflation and a steady increase in borrowing costs, the housing market has retained a surprising amount of momentum.

“Demand is being supported by strong labour market conditions, where the unemployment rate has fallen and with the number of job vacancies at a record high. At the same time, the stock of homes on the market has remained low, keeping upward pressure on house prices.

“We continue to expect the housing market to slow as the year progresses. Household finances are likely to remain under pressure, with inflation set to reach double digits in the coming quarters if global energy prices remain high. Measures of consumer confidence have already fallen towards record lows.

“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.”

Mr Gardner also noted that the Nationwide has been producing its house price index for 70 years — the same amount of time that Her Majesty the Queen has been on the throne.

He said: “2022 marks the Queen’s Platinum Jubilee, and it is also 70 years since we produced our first house price data. The housing market was very different back in 1952, with just 32 per cent of households owning their own home, compared to 65 per cent today.

“The UK average house price in 1952 was £1,891 — which is around £62,000 in today’s money. This means that current average house prices are 4.3 times higher than 1952 levels in real terms, adjusting for retail price inflation.

“In 1952, the typical house cost four times average annual earnings, but today the average home costs 6.9 times earnings. However, borrowing costs were higher back then, with Bank Rate at 4.0 per cent, compared to 1.0 per cent currently.”

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