"Mortgage approvals data suggests that market activity appears to be holding up well following the end of the stamp duty holiday. Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive"
- Robert Gardner - Nationwide
The annual rate of house price growth increased marginally in May to 3.5%, compared to 3.4% in April, with house prices rising by 0.5% month on month after taking account of seasonal effects, according to the latest data released this morning from Nationwide.
The price of a typical home in the UK now stands at £273,427, up from £270,752 in April.
“Annual UK house price growth was marginally stronger in May at 3.5%, compared with 3.4% in April," said Robert Gardner, Nationwide's Chief Economist. “Official data confirmed that there was a significant jump in residential property transactions in March, with buyers bringing forward their purchases to avoid additional stamp duty costs. Owner-occupier house purchase completions were around twice as high as usual and the highest since June 2021 (which was also impacted by stamp duty changes).
“Nevertheless, mortgage approvals data suggests that market activity appears to be holding up well following the end of the stamp duty holiday. Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.
“Unemployment remains low, earnings are rising at a healthy pace (even after accounting for inflation), household balance sheets are strong, and borrowing costs are likely to moderate a little if Bank Rate is lowered further in the coming quarters as we, and most other analysts, expect.
Price of countryside homes ploughs ahead of urban properties
Gardener continued, “Our recent special report identified that average house price growth in predominantly rural locations has continued to outpace more urban areas. Between December 2019 and December 2024, house prices in predominantly rural areas increased by 23%, compared with 18% in areas that are largely urban.
“The pandemic had a significant impact on housing demand during 2021 and 2022, with a shift in preferences towards more rural areas, particularly amongst older age groups. Whilst these effects have now faded, less urban areas have continued to hold the edge in terms of house price growth.
“In our latest housing market survey, we focused on homeowners who have moved in the last five years. Our findings indicate that 63% of house moves were within the same type of area, with the biggest flow being within large towns or cities. Around 9% of moves were from towns/cities to rural areas (villages or hamlets), although this was partially offset by 7% who moved from rural to more urban areas.
He concluded, “However, amongst those who moved to a different type of area, there was a significant difference by age group, with younger people (those aged 25-34) tending to move to more urban areas, and older age groups, particularly 55+, favouring more rural areas.
Industry reaction
“There are tentative signs of momentum in the UK housing market after a slump in activity in April caused by higher rates of stamp duty, but a dramatic rebound in prices doesn’t feel likely," says head of UK residential research at Knight Frank, Tom Bill.
"Concerns around inflation and the government’s financial headroom mean mortgage rates don’t feel poised to drop meaningfully. Buyers also have a lot of properties to choose from this spring, which we expect to keep downward pressure on prices in the short term.”
“It is reassuring to witness consistent house price growth and a strong appetite as people continue to approach the homebuying and selling process, especially when the UK economy continues to adapt to both domestic and international events," comments Propertymark CEO Nathan Emerson.
“With the rate of inflation still very much in sharp focus, it will be interesting to see what direction of travel the Bank of England may take regarding base rates when they meet again next week. Ultimately, it would be welcome news for consumers should there be any further base rate cuts; however, the Monetary Policy Committee will likely be approaching any decision with extreme caution, especially considering many economists are predicting inflation to further rise."
David Johnson, managing director of property consultancy INHOUS, says, “Buyer demand picked up immediately after the bank holidays and has remained strong throughout May. This level of buyer motivation has resulted in the majority of sellers receiving multiple offers and achieving their asking price. One and two-bedroom apartments remain particularly sought-after as well as larger family homes in and around commuter hotspots.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says, “Last month’s interest rate cut from the Bank of England gave the housing market and wider economy a timely boost following the end of the stamp duty concession.
“Lenders have been reducing mortgage rates and enhancing loan-to-incomes, increasing the size of loan that some borrowers can access. However, while the borrowing environment may be easing, higher inflation and the wider economic picture remain a concern, which could mean the pace and size of further base rate reductions is more gradual than markets thought only a few weeks ago."
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says, “Since the end of the stamp duty holiday, we have seen stable transaction volumes reflecting the ongoing resilience of the housing market despite continued economic uncertainty.
“We’re seeing a flight to quality – buyers are more selective and price-sensitive but still transacting where values align with lifestyle. It’s also clear that while high mortgage rates have cooled the market, demand remains underpinned by low supply in many areas.
“The key challenge is affordability. Mortgage rates, higher stamp duty and, for some, the increased cost of private school fees, is affecting many families who would like to move, but are unable to.”
