"A new government and the first rate cut since March 2020 should inject more energy after the summer and we believe UK prices will rise by 3% in 2024"
- Tom Bill - Knight Frank
The latest housing market analysis from Nationwide has revealed broadly stable conditions ahead of a widely expected reduction of the Base Rate next month.
According to Nationwide's data, the price of a typical home in the UK during June stood at £266,604 - up slightly from £264,249 in May.
Robert Gardner, Nationwide's Chief Economist, comments: “UK house prices edged up by 0.2% in June, after taking account of seasonal effects. This resulted in the annual rate of growth rising from 1.3% in May to 1.5% in June, leaving prices around 3% below the all-time high recorded in the summer of 2022.
Housing market activity remains fairly subdued
“Housing market activity has been broadly flat over the last year, with the total number of transactions down by around 15% compared with 2019 levels. Transactions involving a mortgage are down even more (nearly 25%), reflecting the impact of higher borrowing costs. By contrast, the volume of cash transactions is actually around 5% above pre-pandemic levels.
“While earnings growth has been much stronger than house price growth in recent years, this hasn’t been enough to offset the impact of higher mortgage rates, which are still well above the record lows prevailing in 2021 in the wake of the pandemic.
"For example, the interest rate on a five-year fixed-rate mortgage for a borrower with a 25% deposit was 1.3% in late 2021, but in recent months this has been nearer to 4.7%.
“As a result, housing affordability is still stretched. Today, a borrower earning the average UK income buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 37% of take-home pay - well above the long-run average of 30%.
Mixed picture amongst the regions in Q2 2024
“Our regional house price indices are produced quarterly, with data for Q2 (the three months to June) showing a mixed picture, with some regions seeing a modest pick up in growth, but others still recording annual price declines.
“Northern Ireland remained the best performing area, with prices up 4.1% compared with Q2 2023. Across England overall, prices were up 0.6% compared with Q2 2023, while Wales and Scotland both saw a 1.4% year-on-year rise. Northern England (comprising North, North West, Yorkshire & The Humber, East Midlands and West Midlands), continued to outperform southern England, with prices up 2.4% year-on-year.
“Meanwhile southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) saw a 0.3% year-on-year fall (the same as last quarter). London remained the best-performing southern region with annual price growth maintained at 1.6%. East Anglia was the weakest performing region, with prices down 1.8% year-on-year.”
Tom Bill, head of UK residential research at Knight Frank, said: “The seasonal spring bounce in the UK housing market has been a little lacklustre this year, with demand kept in check by high mortgage rates and a degree of uncertainty around the election. A new government and the first rate cut since March 2020 should inject more energy after the summer and we believe UK prices will rise by 3% in 2024.”
Matt Thompson, head of sales at Chestertons, says: “House hunters have been feeling uncertain amid political and financial developments but with change on its way, have become more confident to resume or finalise their property search. As a result, June concluded with a heightened level of buyer activity.”
Nathan Emerson, CEO of Propertymark, comments: “It’s especially positive news to see further progression within the housing market year on year, with affordability and confidence returning, despite interest rates remaining high currently.
"Once the political climate fully settles down following the general election, the housing market will hopefully see yet more buoyancy. Propertymark remains keen to see plans from policymakers as to how any incoming government intends to kick start their proposed house building ambitions, as well as learn more regarding any programme of support for first-time buyers.”
