"We still expect activity to pick up as the summer progresses, despite ongoing economic uncertainties in the global economy, since underlying conditions for potential homebuyers in the UK remain supportive"
- Robert Gardner - Nationwide
Annual house price growth across the UK eased to 2.1% in June, down from 3.5% in May, according to the latest figures from Nationwide. On a monthly basis, prices declined by 0.8% after seasonal adjustment, bringing the average UK house price to £271,619, compared to £273,427 the previous month.
“UK house price growth slowed to 2.1% in June, from 3.5% in May,” said Robert Gardner, Nationwide's chief economist. “Prices declined by 0.8% month-on-month, after taking account of seasonal effects. The softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April. Nevertheless, we still expect activity to pick up as the summer progresses, despite ongoing economic uncertainties in the global economy, since underlying conditions for potential homebuyers in the UK remain supportive.”
Gardner noted that several key economic indicators remain positive, providing support for the housing market. “The unemployment rate remains low, earnings are rising at a healthy pace in real terms (i.e. after accounting for inflation), household balance sheets are strong and borrowing costs are likely to moderate a little if Bank Rate is lowered further in the coming quarters as we and most other analysts expect,” he said.
Most UK regions experience slowing growth in Q2
Nationwide’s regional index, based on data for the three months to June, showed a general softening in house price growth across much of the UK.
“Northern Ireland remained the strongest performer by a wide margin, though it did see a slowing in annual price growth to 9.7%, from 13.5% in Q1,” explained Gardner. “While significantly ahead of other UK regions in Q2, it was similar to the robust rates of growth seen in border regions of Ireland in recent quarters. Scotland recorded a 4.5% annual rise, while Wales saw a 2.6% increase.”
Growth across England moderated slightly, with average prices rising by 2.5% year-on-year in Q2, compared to 3.3% in the previous quarter. The north-south divide narrowed during the period, with northern regions showing stronger gains.
Northern England (including the North, North West, Yorkshire & The Humber, East Midlands and West Midlands) recorded a 3.1% annual increase
Southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) saw a 2.2% rise
The North led the English regions with a 5.5% year-on-year increase, while East Anglia recorded the weakest growth, with prices up just 1.1%.
Terraced houses show strongest price gains
Nationwide's latest data on property types highlights varying trends over the past year.
“Terraced houses have seen the biggest percentage rise in prices over the last 12 months, with average prices up 3.6% year on year,” said Gardner.
“Flats saw a further slowing in annual price growth to 0.3%, from 2.3% last quarter. Semi-detached properties recorded a 3.3% annual increase, while detached properties saw a 3.2% year-on-year rise,” he added.
Industry reaction
Tom Bill, head of UK residential research at Knight Frank, commented, “The legacy of the March stamp duty cliff edge is high supply and softer demand, which is putting downwards pressure on house prices. The good news is that rate cut expectations are growing due to the weaker UK economic outlook.
"The bad news is that the Chancellor has zero financial headroom to play with, which means a re-run of 2024 and a game of ‘guess the tax rise’ ahead of the Budget. We think there will be modest single-digit house price growth by the end of the year, but if you are planning to sell over the next few months, asking prices will need to reflect the fact that it is very much a buyers’ market.”
Nathan Emerson, CEO at Propertymark, comments, “Despite the fact that we have witnessed much economic turmoil in the first half of the year, it is highly encouraging to see stability within the housing market as house price growth softened in June. We still sit in a phase of inflation not quite being where the Bank of England ideally want it to be, and we still have elevated base rates. Nonetheless, it remains encouraging that consumers are still approaching the buying and selling process with a firm degree of confidence.
“Across the year to date, we have seen the average number of properties per member branch hold absolutely steady, and this year’s number represents a figure that is almost 20 per cent higher than the same period twelve months earlier.”
Jason Tebb, President of OnTheMarket, comments, “There is still plenty of evidence of steady activity in the housing market, despite a considerable number of buyers bringing forward transactions in order to take advantage of the stamp duty holiday before it ended in March. Average house prices are being kept in check by the increase in stock, which exceeds supply in some areas.
"Interest-rate reductions are more important than ever in order to boost activity and momentum in the market now that the stamp duty holiday is no longer available. Four quarter-point base-rate cuts since last August have made all the difference to affordability and the ability to plan ahead with confidence. Further reductions will give the market added impetus as we head into the latter half of the year.
"Mortgage lenders continue to gently trim rates and ease criteria, which is further assisting borrowers dealing with stubborn inflation and the elevated cost of living."
