Bank’s chief economist says market showing resilience with election not expected to generate significant change
The latest Nationwide House Price Index showed a 0.4% increase in house prices in May compared to the previous month, taking into account seasonal adjustment factors.
The average non-seasonally adjusted house price has risen by 0.9% from £261,962 last month to £264,249 in May.
The annual house price growth has more than doubled from 0.6% in April, to 1.3% this month.
The latest Office of National Statistics figures showed that house prices were up by 1.8% year-on-year in March, while on a monthly basis they increased by 0.7%.
Regarding the potential impact of the general election on house price movements, Robert Gardner, chief economist at Nationwide, remarked: “On the whole, prevailing trends have been maintained just before, during and after UK general elections. Broader economic trends appear to dominate any immediate election-related impacts”.
He said that past elections did not appear to have caused “volatility” in house prices or resulted in a significant change in house price trends.
He noted that one exception was 2019, with the initial lockdown in 2020 stalling housing market activity. However, Gardner said “activity subsequently bounced back once restrictions began to be lifted”.
>> See also: House prices up 1.8% year-on-year, says ONS
>> See also: House prices ‘held steady’ in April, according to Halifax
Gardner added: “The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer term interest rates in recent months. Consumer confidence has improved noticeably over the last few months, supported by solid wage gains and lower inflation.”
Michelle Stevens, mortgage expert at personal finance comparison site finder.com, said that the Bank of England is predicted to cut interest rates in the coming months, and that “as a result buyers who have so far held off are beginning to return to the market”.
Tom Bill, head of UK residential research at Knight Frank commented: “House prices do not feel poised to rally, despite a seasonal increase in demand. High supply is keeping a lid on prices and stubborn services inflation means swap rates are rising and mortgages starting with a ‘3’ feel some way off. Asking prices still need to reflect the fact that buyers currently have tighter budgets and more choice”.
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