"The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer-term interest rates in recent months. Consumer confidence has improved noticeably over the last few months, supported by solid wage gains and lower inflation"
- Robert Gardner - Nationwide
The UK housing market continues to show resilience, with average house prices rising by 0.4% in May following a period of subdued growth.
Nationwide's latest report has revealed that annual house price growth picked up pace during the month, rising to 1.3% from 0.6% in April. The price of a typical home in the UK now stands at £264,249 - up £2,287 from April's £261,962.
Robert Gardner, Nationwide's Chief Economist, said: “UK house prices increased by 0.4% in May, after taking account of seasonal effects. This resulted in a slight pickup in the annual rate of house price growth to 1.3% in April, from 0.6% the previous month.
“The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer-term interest rates in recent months. Consumer confidence has improved noticeably over the last few months, supported by solid wage gains and lower inflation.
Will the election impact the housing market?
“With the recent announcement that the UK general election will take place on 4 July, we have analysed house price movements in the months around previous elections, and also the 2016 EU referendum.
“Past general elections do not appear to have generated volatility in house prices or resulted in a significant change in house price trends.
“In the chart below we have indexed average house prices so they equal 100 in the election months in each of the years shown. We can then compare house price movements in the six months leading up to each election (t-6 to t-1) and following each vote (t+1 to t+6).
Robert Gardner continues: “On the whole, prevailing trends have been maintained just before, during and after UK general elections. Broader economic trends appear to dominate any immediate election-related impacts.
“We also examined how activity, in particular house purchase mortgage approvals, responded to past UK elections. Here the picture is less clear but again there doesn’t seem to be any tangible impact in the three months either side of a general election.
“2019 is a notable exception, but this was due to the impact of the pandemic, with the initial lockdown in 2020 suppressing housing market activity. Activity subsequently bounced back once restrictions began to be lifted.
“It appears that housing market trends have not traditionally been impacted around the time of general elections. Rightly or wrongly, for most homebuyers, elections are not foremost in their minds while buying or selling property.”
Industry reactions
Nathan Emerson, CEO of Propertymark, comments: “The housing sector has seen a strong start to the year and it’s positive to see further momentum.
"We are conscious there may be a potential slow down across the summer as a knock-on effect following the general election, but with inflation firmly on its journey downward and with scope for interest rate cuts, we may soon see a much welcome influx of highly competitive deals from lenders hit the marketplace.”
Tom Bill, head of UK residential research at Knight Frank commented: “House prices do not feel poised to rally, despite a seasonal increase in demand. High supply is keeping a lid on prices and stubborn services inflation means swap rates are rising and mortgages starting with a ‘3’ feel some way off.
"Asking prices still need to reflect the fact that buyers currently have tighter budgets and more choice. The general election is unlikely to impact mainstream property markets and if buyers want to know what prices will do next, the next inflation reading rather than the political manifestoes is the best place to start.”
Anna Clare Harper, CEO of sustainable investment adviser GreenResi, says: “UK house prices increased by 1.4% annually in May, which will be seen as positive news for many, as upward movement in the housing market is generally regarded as a good thing. It's a reflector and reflection of confidence.
“The question everybody is asking is what impact will the election - and its results - have on the property market.
“Elections make investors and aspiring homeowners nervous. However, the truth is that the results of the election are unlikely to make a material difference to house prices. This is for two reasons.
"Firstly, the fundamentals won’t change: need continues to outstrip supply for housing as a result of population growth, and the UK’s legal framework and enforcement remain attractive internationally, meaning the market is stable and trusted.
“Secondly, while there may be policies that affect pricing for a small proportion of homes, both parties offer similar approaches. The objective is confidence during their political term, buoyed by house prices.
“For these reasons, fears of dramatic change following the election are overblown; the biggest issue is nerves and inaction in the run-up - so homeowners considering a sale, aspiring homeowners and investors alike will be pleased that the run-up to the election is not too long.”
Director of Benham and Reeves, Marc von Grundherr, commented: “Not only are house prices up year on year, but this rate of growth has started to accelerate as the UK property market picks up the pace during its busiest time of year.
"While the nation may now be gripped by political uncertainty following the news of a general election, this will have little impact on the nation's buyers and sellers, who will continue to pursue their plans to move regardless of who is in 10 Downing Street come July.”
CEO of Yopa, Verona Frankish, commented: “Despite a prolonged period of higher interest rates we’re yet to have seen any notable decline in property values and it seems as though the tide has now well and truly turned, as the market starts to build momentum following a resurgence in market activity so far this year.
"The possibility of a base rate reduction in the coming months will only help to boost current sentiment and we expect the market to march on undeterred by the political noise being generated from the impending election.”
