House prices crawl and face risk of a fall: Nationwide House Price Index
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on publication of the latest Nationwide House Price Index for June, which shows that house prices crawl and face risk of a fall.
Key points from the publication:
- Annual house price growth slowed again to 10.7% in June – from 11.2% in May.
- Back in March, annual growth was at 14.3% – its highest in almost eight years.
- During June, prices grew just 0.3% (seasonally adjusted) – the third consecutive month under 1%.
- The past three months combined have seen growth of just 2.6% (seasonally adjusted).
- The average house price hit a record high of £217,613.
Sarah Coles says:
“House price rises have slowed to a crawl. The annual figures look impressive at 10.7%, but for the past three months we’ve seen less than 1% growth each month, and 2.6% growth in total. It’s like lunchtime for a mountain climber.
“If you focus on how far you climbed earlier, it’s easy to miss the fact you’re not going anywhere in a hurry right now. The question for any climber is what comes next: more slow progress or a fall?
“Annual house price growth hit a high point in March, but has been dropping back ever since. This isn’t coming as a shock to anyone, because we were just waiting for the huge challenges facing buyers to feed into the figures.
“Rocketing house prices themselves have taken a toll. Since the onset of the pandemic, every area apart from London and its immediate surroundings have seen prices rise by at least a fifth. In the South West, growth over this period has hit an eye-watering 27.7%, and in Wales it’s 26.2%. There comes a time when prices simply rise out of reach for anyone hoping to buy a first property or move significantly up the ladder.
“At the same time, inflation is inflicting incredible pain on buyers. They don’t just face the problem that the rising price of everything from energy to food and fuel makes it difficult to stretch to a bigger mortgage, they also face the concern of mortgage lenders, who feed these figures into affordability calculations and conclude that they can’t afford the move.
“It doesn’t help that wages have fallen so far behind inflation. Lenders prefer to take into account your usual salary – without bonuses – and after inflation these have dropped 2.2% in a year.
“As the Bank of England raises rates to keep inflation under control, this also puts a dent in buyer enthusiasm. Mortgage rates are still low by historic standards, but they are rising every month, which raises the spectre of much higher payments further down the line.
“The question is whether we will see prices slow to a crawl, stagnate, or start to drop if we see a recession. An awful lot depends on things we don’t yet know – including how high interest rates will go, how deep any recession might be, the impact it could have on jobs, and whether this is serious enough to cause real damage to the property market.
“Certainly the risks on the downside are starting to build. We’re seeing the first predictions of price drops, and while these are currently a few voices in the crowd, they’re highly unlikely to be the last.
“For anyone planning to buy right now, it’s going to give them pause. The desperate dash for property at a time of rocketing prices may be over. Buyers have time to consider whether this is a move they can really afford, and whether they’ll still be happy they made it if prices pull back later in the year.”
Kindly shared by Hargreaves Lansdown
Main article photo courtesy of Pixabay
