House prices have risen by 11 percent annually, despite the rapid rise in interest rates this year, according to the largest British construction company Nationwide.
The average home is now worth £271,209, with property inflation rising in July from the 10.7 percent growth recorded in June, and it was the twelfth straight month that house prices rose.
The construction company said the housing market had maintained “surprising momentum” amid the rising cost of living.
But leading broker Knight Frank said big increases in new mortgage rates meant a slowdown is on the way for the property market.
Pandemic boom: House prices have skyrocketed after a first blow at the start of the Covid-19 pandemic, Nationwide index shows
Nationwide said it expects the market to slow as the cost of living crisis continues, with inflation expected to hit double digits later in the year.
The Bank of England’s Monetary Policy Committee is forecast to raise key interest rates by 0.50 basis points to 1.75 percent this Thursday as it struggles to get a grip on inflation.
The big 0.1 percent rise in the base rate at the end of 2021 has led to a surge in mortgage costs, with new fixed-rate deals rising significantly and potentially adding hundreds of pounds to the monthly cost of buying a home. .
If key interest rates continue to rise, it will put pressure on some borrowers and potentially price others out of the market.
Commenting on the numbers, Robert Gardner, Nationwide’s chief economist, said: “The housing market has maintained a surprising degree of dynamism given the mounting pressure on household budgets from high inflation, which has already pushed consumer confidence to an all-time low.
“While there are tentative signs of a slowdown in activity, with a dip in home purchase mortgage approvals in June, this has yet to feed through into price growth.”
The Price Is Wrong: Buying a Home Has Been More Expensive Than Ever Compared to Wages Lately, Nationwide Data Shows
Others, however, are less optimistic. Tom Bill, head of UK Residential Research at Knight Frank, said: ‘Despite a double-digit rise in house prices, a slowdown is on the way.
Mortgages have become noticeably more expensive in recent months and inflation will get worse before it gets better.
For those wondering how housing prices can continue to grow as the cost of living increases, the answer is that they happen for the same reason: a disruption in the supply chain.
“As there is more real estate on the exchange and demand is ultimately held back by higher rates, we expect price growth to decline in single digits this year.”
Analysts at Capital Economics have projected that house price growth will not only slow, but also decline – predicting a 5 percent decline from current levels by the end of 2023.
Andrew Wishart of the company said: “We think the main conclusion from the July figures is that house prices are already stagnating.
“So while limited inventory has supported pricing so far, we think it’s only a matter of time before deteriorating demand pushes home prices down.”
Continued climb: UK house price growth continues despite economic headwinds
How well is the real estate market holding up?
A separate report from real estate portal Zoopla today contradicts forecasts of declining real estate values, predicting that house prices as a whole would rise by 5 percent by 2022.
It has forecast 1.3 million sales by the end of the year, 100,000 more than originally forecast.
Zoopla said the data showed that there were enough people looking to move home to maintain “normal” market activity.
The company’s research found that UK house prices had risen by 8.3 percent in the past 12 months, bringing the average house price to £256,600.
And areas with the most modest prices are growing the fastest, as home demand remains 25 percent around the five-year average.
Real estate demand begins to slow as inventory levels recover from lows earlier in the year
Wales and the South West continue to experience some of the biggest house price increases in the UK
Coastal cities see falling house prices
Regionally, Wales saw the largest year-over-year house price growth at 11 percent, while the South West and East Midlands also posted double-digit growth.
Looking at individual towns and cities, Wigan saw 11.8 percent growth, while homeowners in Mansfield saw an 11.6 percent increase and Warrington home prices rose 11.2 percent.
By contrast, coastal areas such as Truro in Cornwall, Torquay in Devon and Canterbury in Kent are seeing a slowdown, Zoopla said.
Buyer demand in these areas is now up to 16 percent below the five-year average and 22 percent or more below the July 2022 level.
First-time buyer activity remains 5 percent above pre-pandemic levels, despite continued pressure on affordability.
The average property now costs almost nine times the normal salary as house price affordability in England has reached the worst level ever recorded by the ONS.
News that the Bank of England scrapped the affordability test had raised hopes that it would make it easier to get a mortgage, but experts warn it is unlikely to have a significant impact on the approach taken by lenders.
Best Mortgage Rates and How to Find Them
Mortgage rates have risen significantly as the Bank of England base rate has risen rapidly.
If you want to buy, move or transfer your first home, it is important to get good independent mortgage advice from a broker who can help you find the best deal.
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