"The UK’s residential property market appears to be in recovery mode following the turbulence of 2023"
- Alice Haine, personal finance analyst at Bestinvest
UK house prices fell by 0.2% month-on-month in August, but the annual rate of house price growth continued to edge higher according to the latest Nationwide house price index.
Average prices were up 2.4% year-on-year, up from the 2.1% recorded in July and the fastest pace since December 2022 (2.8%). However, prices are still around 3% below the all-time highs recorded in the summer of 2022.
Robert Gardner, Nationwide's chief economist, said: "While house price growth and activity remain subdued by historic standards, they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings (which makes raising a deposit more challenging).
“Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth."
Tomer Aboody, director of MT Finance, commented: “Any concerns or uncertainty there may have been pre-election dissipated in August as property market sentiment picked up, buoyed by the rate cut.
“High borrowing costs have been an issue for a while so with lenders trimming their mortgage rates and promise of more reductions from the Bank of England to come, this should lead to an increase in activity in the autumn.
“While there are concerns about what the Budget will have in store, the Chancellor has an opportunity to tackle stamp duty reforms to assist buyers and boost all-important transaction levels. Let’s hope she takes it, benefiting not only the housing market but the wider economy.”
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, added: “The UK’s residential property market appears to be in recovery mode following the turbulence of 2023 when high borrowing costs and low supply stifled activity and dampened prices. With more sub-4% mortgage rates now available and the prospect of more interest rate cuts this year, buyers are flooding back into the market as improving affordability levels raise the likelihood that people can net their desired home.
“Meanwhile, sellers, who have been sitting on the sidelines waiting for better market conditions, now feel confident to list their homes though those hoping for a good deal may find the glut of new properties for sale along with mortgage rates that are still relatively high could keep a lid on prices for now. The average estate agent currently has 33 homes on their books – a seven-year high for stock levels – so sellers are being urged to be sensible about pricing with many forced to discount to secure a sale, while those listing properties with higher energy efficiency energy ratings stand a better chance of getting the price they want.
"Another interest rate reduction from the Bank of England sooner rather than later could catalyse the market even further as the lure of cheaper mortgage rates will be attractive for movers who have been waiting patiently in the wings for borrowing conditions to improve. The BoE has stressed, however, that it remains cautious about further cuts following the 25-basis point reduction at the start of this month, as it wants to ensure any lingering cost pressures are stamped out. The pace of wage growth and sticky services inflation have been a concern for policymakers in recent months, and while they are now receding slowly, the headline inflation rate is expected to remain above the BoE’s target of 2% in the final quarter of the year. It means borrowers may potentially only see one further rate cut this year, with many economists expecting the central bank to hold rates at its meeting in September."
