The property market will remain resilient in the face of current challenges if the latest shock passes relatively quickly, with any short-term softening short lived, according to the latest Nationwide House Price Index.
The report reveals UK annual house price growth slowed to 1.7% in May, down from 3.0% in April.
“Given the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices and market interest rates, some loss of momentum was to be expected,” Nationwide’s chief economist Robert Gardner said.
“Indeed, consumer confidence has weakened noticeably since the start of the conflict, with GfK’s headline index falling to its lowest level since late‑2023 in April, with only a marginal increase in May.
“Measures of housing market sentiment have also deteriorated. The Royal Institution of Chartered Surveyors reported a sharp fall in new buyer enquiries in March, taking the index to its weakest reading since 2023 and remained deep in negative territory in April.”
However, the UK economy and housing market have proved “remarkably resilient”, Gardner added.
“Household finances are solid, with total household debt at its lowest level relative to income for around two decades, and sizeable savings buffers have been built up, though these are not evenly distributed across households.
“Moreover, housing affordability had been improving steadily in recent years due to a combination of income growth outpacing house price growth by a wide margin and a modest decline in borrowing costs.
“While market interest rates have risen in recent months, the impact on affordability has so far been modest. Indeed, swap rates, which underpin fixed‑rate mortgage pricing, remain well below the highs reached in 2023 and are broadly in line with levels prevailing in 2024, implying only a partial reversal of earlier gains.
“This provides some confidence that, if the latest shock passes relatively quickly, and energy prices normalise in the quarters ahead, any near-term softening in the housing market will also prove short lived.”
Jason Tebb, president of OnTheMarket, said the figures show continued resilience. “The fallout from the war in the Middle East is making itself felt, with uncertainty and the challenging economic backdrop resulting in a softening in the market and some loss of momentum.
“That said, the housing market continues to demonstrate resilience. Average prices dipped on a monthly basis as focused, price-sensitive buyers negotiate hard, while sellers realise that they will struggle to sell over-ambitiously priced homes.
“This is the strongest buyers’ market we have seen in many years, with plenty of stock to choose from. Needs-based buyers are transacting, encouraged by lenders continuing to trim their mortgage rates. The Bank of England’s decision to hold interest rates at recent meetings is having a steadying effect, suggesting a calm, considered approach with no need to panic.”
Marc von Grundherr, director of Benham and Reeves, agreed. He said: “A monthly dip in house prices shouldn’t be mistaken for a market downturn. Buyers remain active, transaction levels are holding firm and house prices remain higher than they were this time last year.
“Yes, the landscape may be more challenging, but despite wider economic angst, higher mortgage rates and stubborn inflation, homebuyers are continuing to make their move when the right opportunity presents itself.”
There is further cause for optimism according to Verona Frankish, CEO of Yopa, as the property market heads into the busy summer months: “It’s important to judge the health of the property market with a long-term view and the bigger picture remains one of stability, with house prices still higher than they were a year ago,” she pointed out.
“Whilst we may have seen a marginal decline in property values on a monthly basis, this is unlikely to materialise into a long-term trend given we’re now entering peak selling season when the market really heats up.”
