UK House Prices Defy Expectations with Modest Rise in June
Despite the gloomy predictions, UK house prices have shown a surprising resilience, with a modest 0.2% increase in June, according to Nationwide. This marks the second consecutive month of growth, leaving many economists scratching their heads.
House prices continue to defy expectations
The average price of a home in Britain now stands at £266,064, the highest since October 2022. While this is still 3% below the peak recorded in the summer of 2022, it’s a remarkable feat considering the rapid increase in mortgage rates, which has reduced affordability for potential buyers.
The Impact of Mortgage Rates
Transaction volumes have been significantly affected by the recent market downturn. Sales are down by 15% compared to 2019, with mortgage transactions taking an even bigger hit, down by nearly 25%. This is a stark contrast to cash transactions, which have increased by about 5% compared to pre-pandemic levels.
Mortgage rates continue to affect the market
Industry experts believe that a shortage of homes for sale has helped to support prices, with many people delaying moving plans in hopes of improved affordability. Additionally, the market has seen few forced sales, thanks to more accommodating banks, better stress-testing, and pandemic savings.
A North-South Divide
Nationwide’s data reveals a continuing north-south divide in the UK housing market. Prices have generally risen in northern regions over the past year, while they have fallen in most areas south of Birmingham. The fastest price increases were seen in northwest England and Northern Ireland, where prices rose by 4.1% over the past 12 months.
The north-south divide in the UK housing market
In contrast, house prices in the southwest of England fell by 1.7%, and by 1.3% in East Anglia. London was an exception in the south, with prices in the capital rising by 1.6% compared to last June.
The Future of UK House Prices
While the recent growth is a welcome surprise, economists caution that prices are likely to “flatline at best” over the summer due to the impact of increased mortgage rates. Andrew Wishart, senior UK economist at Capital Economics, had initially forecast a 3% rise in 2024, but now expects a modest increase of 0.5%.
The future of UK house prices remains uncertain
As the market continues to navigate the challenges of high mortgage rates and reduced affordability, one thing is clear: the UK housing market is full of surprises. Whether prices will continue to defy expectations or eventually succumb to the downward pressure remains to be seen.
