House prices have risen 11 per cent a year, according to Britain’s largest building association Nationwide, despite a rapid rise in interest rates this year.
The median house price is now £271,209 with property inflation rising in July from Growth was 10.7 percent in June, the 12th consecutive month in which home prices rose.
The Building Society said the housing market had retained a “surprising degree of momentum” amid the rising cost of living.
But leading real estate agent Knight Frank said large increases in new mortgage rates meant that “a post-slowdown” for the real estate market.
Pandemic boom: House prices are up after an initial flash at the start of the Covid-19 pandemic, Nationwide index shows
Nationwide said it expects to see the market slow as the cost-of-living crisis continues, with inflation expected to reach double digits later in the year.
The Bank of England’s Monetary Policy Committee is expected to raise the base interest rate by 0.50 basis points to 1.75 percent this Thursday, as it struggles to keep inflation under control.
A dramatic rise in the base rate from 0.1 per cent at the end of 2021 has pushed up mortgage costs, with new fixed-rate deals jumping dramatically adding hundreds of pounds to the monthly cost of buying a home.
If the underlying rate continues to rise, it will put more pressure on some borrowers and possibly exclude others from the market.
Commenting on the figures, Robert Gardner, chief economist at Nationwide, said: “The housing market has retained a surprising degree of momentum given the increasing pressure on household balance sheets from high inflation, which has already pushed consumer confidence to an all-time low.
“While there are initial signs of a slowdown in activity, with a decline in the number of mortgage approvals for home purchases in June, this has not yet been fueled by price growth.”
The Price Isn’t Right: Buying a home is more expensive lately than it’s ever been compared to wages, Nationwide data shows
But others are less optimistic. Tom Bell, UK head of residential research at Knight Frank, said: ‘Despite double-digit house price growth, the slowdown is beyond.
Mortgages have become significantly more expensive in recent months and inflation will get worse before it gets better.
For those wondering how home prices can continue to grow as cost-of-living pressure intensifies, the answer is that they happen for the same reason — supply chain disruption.
“As more properties are listed and demand is ultimately curbed at higher rates, we expect price growth to fall into single digits this year.”
Analysts at Capital Economics have predicted that home price growth will not only slow, but decline – predicting a 5 percent decline from current levels by the end of 2023.
Andrew Wishart, of the firm, said: “We think the key finding from the July figures is that house prices may indeed have stalled.
“So while limited inventory has supported pricing so far, we think it’s only a matter of time before deteriorating demand drives down home prices.”
Continuous climb: UK house price growth has continued despite economic headwinds
How long will the real estate market hold?
A separate report from real estate portal Zoopla today contradicts depreciation projections for real estate, projecting house prices to rise 5 percent in 2022 as a whole.
It predicted 1.3 million sales by the end of the year, 100,000 more than originally expected.
Zoopla said its data showed that enough people wanted to move home to maintain “normal” levels of market activity.
The company’s research found that house prices in the UK have risen by 8.3 per cent in the past 12 months, bringing the average house price to £256,600.
More modestly priced areas are seeing the fastest growth as home demand is still 25 percent above the five-year average.
Property demand has begun to slow with inventory levels rebounding from a low base earlier in the year
Wales and the South West continue to see some of the biggest house price hikes in the UK
Coastal cities are experiencing a slowdown in house prices
Regionally, Wales saw the largest year-on-year growth in house prices at 11 per cent and the South West and East Midlands also saw double digit growth.
Looking at individual towns and cities, Wigan saw a growth of 11.8 per cent while homeowners in Mansfield saw a rise of 11.6 per cent and Warrington home prices rose by 11.2 per cent.
In contrast, coastal areas such as Truro in Cornwall, Torquay in Devon and Canterbury in Kent are seeing slowdowns, Zoopla said.
Buyer demand in these regions is now 16 percent below the five-year average, and 22 percent or more below July 2022 levels.
First-time buyer activity remains 5 percent above pre-pandemic levels, despite ongoing affordability pressures.
The average property now costs nearly nine times the usual salary, with the affordability of house prices in England reaching the worst level ever recorded by the Office for National Statistics.
News of the Bank of England’s cancellation of the affordability test has raised hopes that it will make it easier to get approval for a mortgage, but experts warn it is unlikely to have a significant impact on lenders’ approach.
Best mortgage rates and how to find them
Mortgage rates skyrocketed as the Bank of England’s base rate rose rapidly.
If you are looking to buy your first home, move or remortgage, or are a buy-to-let owner, it is important to get good mortgage advice from a broker who can help you find the best deal.
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