UK house price growth slows as cost of living crisis starts to hit market


House prices continued to climb in April but the rate of growth is slowing as soaring inflation and the cost of living crisis starts to affect the market, figures show.

The average amount paid for a home in the UK climbed 0.3% to £267,620 in April, Nationwide found, the ninth consecutive month of growth.

On an annual basis house prices are up 12.1% year on year, a modest slowdown compared with 14.3% in March.

However, the rate of house price growth slowed from a 1.1% rise in March and is the smallest increase since September last year, according to the monthly property index from the building society.

The boom has been fuelled by a shortage of housing stock and a pandemic-fuelled hunt by city dwellers for larger houses, gardens and more rural living.

However, Nationwide believes the market will slow as household budgets are squeezed and mortgages become more expensive.

“It is surprising that conditions have remained so buoyant, given mounting pressure on household budgets, which has severely dented consumer confidence,” said Robert Gardner, the chief economist at Nationwide.

“We continue to expect the housing market to slow in the quarters ahead. The squeeze on household incomes is set to intensify, with inflation expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high.

“Moreover, assuming that labour market conditions remain strong, the Bank of England is likely to raise interest rates further, which will also exert a drag on the market if this feeds through to mortgage rates.”

The average price of a UK home has risen by almost £50,000 since the start of the coronavirus pandemic in March 2020, according to Nationwide.

It said that given the shift in conditions, it was striking that a survey found 38% of respondents stated they were either in the process of moving or considering a move. The proportion was particularly high in London, where almost half said they were moving or considering a move.

“The stubbornly hot housing market is showing signs of cooling,” said Myron Jobson, a senior personal finance analyst at Interactive Investor.

“Mortgage affordability is a growing concern. The window for cheap mortgages is closing rapidly and the spectre of higher interest rates means that mortgage rates are likely to return to levels we haven’t seen in a while. The property market remains tough for homebuyers and is set to get tougher from an affordability perspective.”

Source: The Guardian