Changes to property taxes announced in the budget are unlikely to impact the housing market, and moderate borrowing costs should support buyer demand, Nationwide’s chief economist Robert Gardner has said.
Commenting on the release of Nationwide’s House Price Index for November, which showed a slight slowdown in the annual rate of house price growth, Gardner said affordability is also likely to improve modestly in the coming months.
“The housing market has remained fairly stable in recent months, with house prices rising at a modest pace and the number of mortgages approved for house purchase maintained at similar levels to those prevailing before the pandemic,” he explained.
“Against a backdrop of subdued consumer confidence and signs of weakening in the labour market, this performance indicates resilience, especially since mortgage rates are more than double the level they were before Covid struck and house prices are close to all-time highs.
“Looking forward, housing affordability is likely to improve modestly if income growth continues to outpace house price growth as we expect. Borrowing costs are also likely to moderate a little further if Bank Rate is lowered again in the coming quarters.
“This should support buyer demand, especially since household balance sheets are strong. Indeed, in aggregate, the ratio of household debt to disposable income is at its lowest for two decades.”
The annual rate of house price growth fell slightly to 1.8% in November, from 2.4% in October, with a 0.3% month-on-month increase. The average UK house price is now £272,998.
“With so much anticipation built up ahead of the autumn budget and continued uncertainty affecting both homeowners and landlords, an easing in house price growth annually is unsurprising,” said Propertymark CEO Nathan Emerson.
“However, a slight uplift in house prices month on month is a positive sign given the crucial role that housing plays in driving the UK economy. A confident and active market supports wider economic growth, which is welcome at this point in the year.
“With inflation likely to ease in the coming months, consumer affordability should gradually improve. When the economic position allows, further reductions in interest rates will help revitalise mortgage lending and support a healthier market.”
“One of the factors keeping price growth modest is the rise in the number of homes coming to market compared with last year,” Iain McKenzie, CEO of The Guild of Property Professionals, explained. “Buyers now have more choice than they’ve had in years, which is helping to keep price pressures in check and encouraging more realistic, grounded negotiations on both sides.”
“Looking ahead, there is room for cautious optimism. Affordability should gradually improve as wage growth continues to outpace house price rises, and if inflation remains on its current trajectory, we may see the Bank of England begin reducing rates in the coming months, potentially as early as its next meeting. Any easing in borrowing costs would provide a welcome boost to both sentiment and activity as we head into the new year.
“Overall, the message from this latest data is clear: the market remains stable, active, and grounded, supported by solid fundamentals and a growing sense of confidence after a period of uncertainty.”
