Nationwide’s July House Price Index showed a ‘modest’ annual house price increase of 2.4% in July, up from 2.1% in June. Prices were up 0.6% month on month, with a house price to earnings ratio of 5.75 – the lowest level in over a decade.
Many industry commentators shared the view that the figures point to a market that continues to hold its own amid challenging economic conditions: Foxtons CEO Guy Gittins said ‘demand has remained resilient’, The Guild of Property Professionals CEO Iain McKenzie said the ‘data paints a picture of a resilient market’, and Tom Brown, managing director of real estate at Ingenious, noted that the news ‘underscores the continued resilience and appeal of the UK property sector’.
Nationwide’s chief economist Robert Gardner agreed. He said ‘activity appears to be holding up well’ as the stamp duty handover begins to ease. He added:
“Indeed, 64,200 mortgages for house purchase were approved in June, broadly in line with the pre-pandemic average, despite the changed interest rate environment.
“After deteriorating markedly in the wake of the pandemic, housing affordability has been steadily improving, thanks to a period of strong income growth alongside more subdued house price growth and a modest fallback in mortgage rates.”
Although the affordability ratio remains relatively high at 5.75 times average income, Gardner pointed out that it is well below the all-time high of 6.9 recorded just three years ago.
‘This is helping to ease deposit constraints for potential buyers, as has an improvement in the availability of higher loan to value mortgages’, he added.
“Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive. Unemployment remains low, earnings are still rising at a healthy pace (even after accounting for inflation), household balance sheets are strong and borrowing costs are likely to moderate a little further if Bank Rate is lowered further in the coming quarters as we, and most other analysts, expect.”
Gardner concluded:
“Providing the broader economic recovery is maintained, housing market activity is likely to continue to strengthen gradually in the quarters ahead.”
Industry reaction
Iain McKenzie, CEO of The Guild of Property Professionals:
“This isn’t a market running hot, but one that is responding logically to improved conditions. The driving force behind this stability is growing borrower confidence, which is being fuelled by an increasingly favourable mortgage environment. Mortgage approvals are rising, and transaction volumes are climbing steadily month-on-month and year-on-year.”
“All eyes are now on the Bank of England. While the Bank is rightly walking a tightrope between managing inflation and stimulating the economy, the widespread expectation of at least one rate cut before the end of the year is providing a psychological boost to the market.
“However, this is a balanced market, not a runaway one. Buyers remain discerning and price-sensitive, and the significant increase in the number of properties for sale is giving them more choice and negotiating power. This increased supply is acting as a natural handbrake, ensuring that price growth remains modest and grounded in reality, which is fundamentally healthy for the long-term.
“Overall, this data paints a picture of a resilient market. We’ve moved beyond recovery and into a phase of considered, confident activity that we expect to carry through the second half of the year.”
Nathan Emerson, CEO at Propertymark:
“This shows that the UK’s housing market remains stable at a time when numerous domestic and international factors are impacting the wider economy.
“With continued talk of a gradual easing of interest rates, even while inflation remains above the Bank of England’s targeted rate of 2%, it is vital that this results in more affordable mortgage products for aspiring buyers and home movers. Many people are delaying paying off their mortgages until later in life via 35-year or 40-year mortgages. Therefore, a reduction in interest rates would be very welcome to help offset ongoing financial pressures and worries over the cost of living for many.”
Tom Brown, managing director of real estate at Ingenious:
“Today’s data underscores the continued resilience and appeal of the UK property sector despite elevated inflation and stubborn borrowing costs. We have welcomed the BoE’s recent rate cut as a hopeful first step in a much-needed easing cycle.
“There’s clearly a significant and notable shortage of housing inventory across various price brackets and locations. Consequently, any decline in homeowner sales is likely counterbalanced by increased demand from renters and investors. This is a trend that is not going away. However, it’s crucial to recognise that the situation isn’t consistent nationwide or across different property pricing brackets.”
Guy Gittins, CEO of Foxtons:
“The latest Nationwide figures show that the monthly decline seen in June has already reversed. While the return to monthly growth is welcome, it’s the annual rate of growth that offers a clearer view of market resilience amid a still uncertain economic backdrop.
“The first half of the year was notably positive, with a strong Q1 driven by increased buyer activity acting ahead of the of the stamp duty deadline. Although Q2 brought a more measured pace, demand has remained resilient in the face of elevated borrowing costs and ongoing economic uncertainty.”
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“There are some early signs that the property market might be starting to come round from its post-stamp-duty-slump. However, it’s too early to break out the bunting, because right now it’s hardly exactly lively, and there are plenty of forces that could stand in the way of a speedy recovery.
“A very small rise in prices is the latest glimmer of hope for house prices. It comes on the back of news that mortgage approvals were up again in June – for the second consecutive month, and mortgage rates are continuing to weave their way gradually down. A combination of pay rises ahead of inflation, falling mortgage rates and keenly priced properties could start to reignite buyer enthusiasm in the coming months.
“On the flip side, there are still not enough buyers, too many homes for sale, and they’re too expensive. A glut of sellers and dearth of buyers means hard bargains are being driven across the property market, and growth forecasts for 2025 are being revised downwards across the board.”
Anthony Codling, managing director of equity research at RBC Capital Markets:
“House price growth picked up in July, once again showing the post stamp duty holiday hangover was short-lived. Those housebuilders that have been reporting high use of sales incentives will be pleased that house prices ticked up as they embark on summer holidays.
“Positive pricing is also a good omen for the autumn selling season as the majors launch their autumn marketing campaigns, and with a Bank Rate cut expected next week, we believe that homebuyer confidence will also tick up. Mortgage approvals are back to 2019 levels, so the good ship ‘UK housing’ is set fair on an even keel.
“It makes us wonder why stamp duty holidays are so often the tool politicians reach for, in our view they cause more headaches than they cure, and the housing market operates perfectly well without them. That said, stamp duty holidays make for good political copy and column inches, and we doubt we have seen the last of them, unfortunately.”
