House prices remain below their August peak as demand softens following a spike in interest in early spring.
The annual rate of house price growth slipped back to -3.4 per cent from -2.7 per cent in April, figures from Nationwide show, as the Bank of England’s decision to hike interest rates rattled buyers confidence.
According to Robert Gardner, Nationwide’s chief economist, activity is likely to remain “subdued” with headwinds to the housing market look set to “strengthen in the near term”.
He said: “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 Bank Rate peaks.”
Yesterday, reports by HMRC also showed that a post-early spring lull also led to a 32 per cent fall in house prices in April with 67,220 homes sold, 29 per cent lower than the previous month.
Matt Thompson, head of sales at Chestertons, said: “In May, the property market was predominantly driven by buyers who were seeking a home rather than an investment.
“Areas such as Battersea Park, Islington and Camden have thereby been particularly sought-after as they offer a wide choice of property styles, nearby amenities, transport links and schools.”
Pantheon Economics’ wonks believe the fall in house prices could continue.
“Looking ahead, we think the downward trend in house prices has a little further to run. True, consumers’ confidence has started to rebound and real disposable incomes now look set to recover modestly over the course of the year, as energy bills start to drop back,” the consultancy said in a note this morning.
“But the jump in markets’ expectations for Bank Rate, following the release of April’s CPI inflation data, suggest that mortgage rates now are on track to rise again in the coming months.”