Housing market headwinds set to strengthen in near-term says Nationwide
THE average UK house price fell by 0.1 per cent month-on-month in May, according to Britain's biggest building society, as it warned that housing market challenges look set to strengthen in the near-term.
The drop follows a 0.4 per cent monthly increase in April, Nationwide Building Society said.
And it prompted one estate agent to remark: "Those sitting on the fence in anticipation of a return to the pandemic glory days of double-digit price growth will be sitting for some time.
Property values fell by 3.4 per cent annually in May, which was a bigger decline than a 2.7 per cent annual fall recorded by the Society in April.
The average UK house price in May was £260,736, according to Nationwide's index.
The figures come a day after HM Revenue and Customs (HMRC) statistics showed that house sales plunged by a quarter in April compared with the same month a year earlier.
In the UK as a whole 82,120 transactions were estimated to have taken place in April, marking a 25 per cent drop compared with April 2022.
In Northern Ireland, there were 1,560 transactions - down from 2,150 in March and some 30 per cent lower than the figure of 2,360 in April last year.
On Nationwide's newest monthly figures, its chief economist Robert Gardner said: "Average prices remain 4 per cent below their August 2022 peak.
"Recent Bank of England data had shown some signs of recovery in housing market activity, although the number of mortgages approved for house purchase in March was still around 20 per cent below pre-pandemic levels."
Mr Gardner continued: "Headwinds to the housing market look set to strengthen in the near-term.
"While consumer price inflation did slow in April, it was a much smaller decline than most analysts had expected.
"As a result, investors' expectations for the future path of (the Bank of England base rate) increased noticeably in late May, suggesting it could peak at (around) 5.5 per cent, well above the (around) 4.5 per cent peak that was priced in around late March.
"Furthermore, rates are also projected to remain higher for longer.
"If maintained, this is likely to exert renewed upward pressure on mortgage rates, which had been trending down after spiking in the wake of the mini-Budget in September last year."
Mr Gardner added: "Nevertheless, in our view a relatively soft landing remains the most likely outcome since labour market conditions remain solid and household balance sheets appear in relatively good shape.
"While activity is likely to remain subdued in the near-term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time, especially if mortgage rates moderate once (the Bank of England base rate) peaks."
James Forrester, managing director of estate agent Barrows and Forrester, said: "Those sitting on the fence in anticipation of a return to the pandemic glory days of double-digit price growth will be sitting for some time.
"However, the outlook is broadly positive and while a natural correction was always likely, we are yet to see any inkling of a market crash."